<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 17, 2000
-----------------
BURLINGTON NORTHERN SANTA FE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-11535 41-1804964
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
2650 Lou Menk Drive, Fort Worth, Texas 76131-2830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(817) 333-2000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On February 17, 2000, Burlington Northern Santa Fe Corporation, a Delaware
corporation ("BNSF"), Canadian National Railway Company, a Canadian corporation
("CN"), North American Railways, Inc., a Delaware corporation jointly owned by
BNSF and CN ("NAR"), and Western Merger Sub, Inc., a Delaware corporation and
wholly owned subsidiary of NAR, entered into an amended and restated combination
agreement (the "Amended and Restated Combination Agreement"), which is filed as
Exhibit 2.1 to this Current Report on Form 8-K.
The Amended and Restated Combination Agreement supersedes the Combination
Agreement dated as of December 18, 1999, which was previously filed as Exhibit
2.1 to the Form 8-K filed on December 21, 1999. The amendments agreed to by the
parties reflected a number of technical and conforming changes, none of which
materially affected the substantive terms of the combination.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
See Exhibit Index included herewith.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BURLINGTON NORTHERN
SANTA FE CORPORATION
Date: March 3, 2000 By: /s/ Thomas N. Hund
-------------------------------
Name: Thomas N. Hund
Title: Senior Vice President and Chief
Financial Officer
2
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Amended and Restated Combination Agreement dated as of February 17,
2000 among Burlington Northern Santa Fe Corporation, Canadian National
Railway Company, North American Railways, Inc. and Western Merger Sub,
Inc.
-Exhibit A to Amended and Restated Combination Agreement - Form of CN
Option Agreement (see Exhibit 99.1 to this Current Report on Form 8-
K).
-Exhibit B to Amended and Restated Combination Agreement - Form of
BNSF Option Agreement (see Exhibit 99.2 to this Current Report on Form
8-K).
-Exhibit C to Amended and Restated Combination Agreement - Form of
Arrangement Resolution.
-Exhibit D to Amended and Restated Combination Agreement - Form of Co-
Operation Agreement.
-Exhibit E to Amended and Restated Combination Agreement - Form of
Plan of Arrangement.
-Exhibit F to Amended and Restated Combination Agreement - Form of
Voting and Exchange Trust Agreement.
-Exhibit G to Amended and Restated Combination Agreement - Form of
BNSF Rights Agreement.
-Exhibit H to Amended and Restated Combination Agreement - Form of
Restated Certificate of Incorporation of North American Railways, Inc.
3
<PAGE>
-Exhibit I to Amended and Restated Combination Agreement - Form of
Amended and Restated Certificate of Incorporation of the Surviving
Corporation.
-Exhibit J to Amended and Restated Combination Agreement - Form of By-
Laws of Surviving Corporation.
99.1 Stock Option Agreement dated as of December 18, 1999 between Canadian
National Railways Company and Burlington Northern Santa Fe Corporation
(the "CN Option Agreement").
99.2 Stock Option Agreement dated as of December 18, 1999 between Canadian
National Railways Company and Burlington Northern Santa Fe Corporation
(the "BNSF Option Agreement").
4
<PAGE>
EXECUTION COPY
================================================================================
AMENDED AND RESTATED
COMBINATION AGREEMENT
by and among
CANADIAN NATIONAL RAILWAY COMPANY
BURLINGTON NORTHERN SANTA FE CORPORATION
NORTH AMERICAN RAILWAYS, INC.
and
WESTERN MERGER SUB, INC.
Dated as of December 18, 1999
================================================================================
<PAGE>
Table of Contents
(not a part of this Agreement)
ARTICLE I
DEFINITIONS AND TERMS
<TABLE>
<S> <C>
1.1 Certain Definitions.............................................. 2
1.2 Other Definitional Provisions.................................... 8
ARTICLE II
THE BUSINESS COMBINATION
2.1 Implementation Steps by CN...................................... 9
2.2 Implementation Steps by BNSF.................................... 10
2.3 Implementation Steps by Newco and Merger Sub.................... 11
2.4 Merger of BNSF.................................................. 11
2.5 Surrender of BNSF Common Shares................................. 13
2.6 Interim Order................................................... 14
2.7 The Arrangement................................................. 14
2.8 CN Convertible Preferred Securities............................. 16
2.9 Board of Directors; Management.................................. 17
2.10 Head Office..................................................... 17
2.11 Withholding Rights.............................................. 17
2.12 The Closing..................................................... 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CN
3.1 Corporate Existence and Power................................... 18
3.2 Corporate Authorization......................................... 18
3.3 Governmental Authorization...................................... 19
3.4 Non-Contravention............................................... 19
3.5 Capitalization.................................................. 19
3.6 Material Subsidiaries........................................... 20
3.7 Canadian Securities Filings and SEC Filings..................... 21
3.8 Financial Statements............................................ 21
3.9 No Material Adverse Changes..................................... 21
3.10 Undisclosed Material Liabilities................................ 21
3.11 Litigation...................................................... 22
3.12 Taxes........................................................... 22
3.13 Employee Matters................................................ 22
3.14 Finders' Fees................................................... 25
3.15 Environmental Matters........................................... 25
3.16 Compliance with Laws............................................ 25
3.17 Year 2000 Compliance............................................ 26
</TABLE>
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BNSF
<TABLE>
<S> <C>
4.1 Corporate Existence and Power................................ 26
4.2 Corporate Authorization...................................... 26
4.3 Governmental Authorization................................... 26
4.4 Non-Contravention............................................ 27
4.5 Capitalization............................................... 27
4.6 Material Subsidiaries........................................ 28
4.7 SEC Filings.................................................. 28
4.8 Financial Statements......................................... 29
4.9 No Material Adverse Changes.................................. 29
4.10 Undisclosed Material Liabilities............................. 29
4.11 Litigation................................................... 29
4.12 Taxes........................................................ 30
4.13 Employee Matters............................................. 30
4.14 Finders' Fees................................................ 33
4.15 Environmental Matters........................................ 33
4.16 Takeover Statutes; Rights Plan............................... 33
4.17 Compliance with Laws......................................... 33
4.18 Year 2000 Compliance......................................... 33
ARTICLE V
COVENANTS OF EACH PARTY
5.1 Reasonable Best Efforts...................................... 34
5.2 Regulatory Approvals......................................... 34
5.3 Certain Filings; Securities Compliance....................... 35
5.4 Access to Information........................................ 36
5.5 Notices of Certain Events.................................... 37
5.6 Stock Exchange Listing....................................... 37
5.7 Public Announcements......................................... 37
5.8 Further Assurances........................................... 37
5.9 Cooperation.................................................. 38
5.10 Closing Matters.............................................. 38
5.11 Obligations of Newco......................................... 38
5.12 Implementation Committee..................................... 39
5.13 Interline Coordinations...................................... 40
5.14 Dividends.................................................... 40
5.15 Shareholder Rights Plans and Similar Matters................. 41
</TABLE>
ARTICLE VI
COVENANTS OF CN
ii
<PAGE>
<TABLE>
<S> <C>
6.1 Conduct of CN................................................. 41
6.2 Tax Matters................................................... 43
6.3 No Solicitations; Other Offers................................ 44
ARTICLE VII
COVENANTS OF BNSF
7.1 Conduct of BNSF............................................... 45
7.2 Tax Matters................................................... 48
7.3 No Solicitations; Other Offers................................ 48
7.4 Takeover Statutes; Rights Plan................................ 50
ARTICLE VIII
CONDITIONS TO THE BUSINESS COMBINATION
8.1 Conditions to the Obligations of Each Party................... 50
8.2 Additional Conditions to the Obligations of BNSF.............. 52
8.3 Additional Conditions to the Obligations of CN................ 52
ARTICLE IX
TERMINATION
9.1 Termination................................................... 53
9.2 Effect of Termination......................................... 54
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1 Modification, Amendment and Assignment........................ 55
10.2 Waiver of Conditions.......................................... 55
10.3 Counterparts.................................................. 55
10.4 Expenses; Certain Payments.................................... 55
10.5 Governing Law and Venue; Waiver of Jury Trial................. 59
10.6 Notices....................................................... 60
10.7 Entire Agreement.............................................. 62
10.8 No Third Party Beneficiaries.................................. 62
10.9 Severability.................................................. 62
10.10 Interpretation................................................ 63
10.11 Fair Construction............................................. 63
10.12 Limitation on Liability for Misrepresentations................ 63
10.13 Survival...................................................... 63
</TABLE>
iii
<PAGE>
Exhibits
--------
Exhibit A..............................................CN Stock Option Agreement
Exhibit B............................................BNSF Stock Option Agreement
Exhibit C.........................................Form of Arrangement Resolution
Exhibit D.........................................Form of Co-Operation Agreement
Exhibit E............................................Form of Plan of Arrangement
Exhibit F............................Form of Voting and Exchange Trust Agreement
Exhibit G........................................Form of Shareholder Rights Plan
Exhibit H.................Form of Restated Certificate of Incorporation of Newco
Exhibit I..........Form of Certificate of Incorporation of Surviving Corporation
Exhibit J...............................Form of By-Laws of Surviving Corporation
Exhibit K...............................Form of Opinion of Davis Polk & Wardwell
Exhibit L................................Form of Opinion of Mayer, Brown & Platt
iv
<PAGE>
Index of Defined Terms
----------------------
1933 Act.............................................................. 2
1934 Act.............................................................. 2
Adverse STB Decision.................................................. 54
affiliates............................................................ 2
Agreement............................................................. 1
Alternative Proposal.................................................. 2
Arrangement........................................................... 2
Arrangement Effective Date............................................ 2
Arrangement Effective Time............................................ 2
Arrangement Resolution................................................ 2
Articles of Arrangement............................................... 3
BNSF.................................................................. 1
BNSF Class A Preferred Stock.......................................... 27
BNSF Common Shares.................................................... 3
BNSF Common Stock..................................................... 3
BNSF Disclosure Letter................................................ 26
BNSF Employee Plans................................................... 30
BNSF Five Business Day Window......................................... 10
BNSF Options.......................................................... 3
BNSF Pension Plans.................................................... 31
BNSF Post-Signing Returns............................................. 48
BNSF Preferred Stock.................................................. 27
BNSF Reports.......................................................... 28
BNSF Representatives.................................................. 48
BNSF Returns.......................................................... 30
BNSF Securities....................................................... 28
BNSF Shareholder Rights Plan.......................................... 10
BNSF STB Notice....................................................... 56
BNSF STB Termination Fee.............................................. 56
BNSF Stock Option Agreement........................................... 1
BNSF Stockholder Meeting.............................................. 10
BNSF Subsidiary Securities............................................ 28
BNSF Termination Fee.................................................. 55
BNSF Voting Debt...................................................... 28
business day.......................................................... 3
Canadian GAAP......................................................... 3
Canadian Securities Regulators........................................ 3
CBCA.................................................................. 3
Circular.............................................................. 3
Closing............................................................... 18
v
<PAGE>
Closing Date.......................................................... 18
CN.................................................................... 1
CN Canadian Employee Plans............................................ 23
CN Canadian Pension Plans............................................. 23
CN Class A Preferred Shares........................................... 19
CN Class B Preferred Shares........................................... 19
CN Common Shares...................................................... 3
CN Disclosure Letter.................................................. 18
CN Employee Plans..................................................... 23
CN Exchangeable Shares................................................ 3
CN Five Business Day Window........................................... 9
CN Non-voting Equity Shares........................................... 4
CN Options............................................................ 4
CN Pension Plans...................................................... 23
CN Post-Signing Returns............................................... 43
CN Preferred Securities............................................... 16
CN Replacement Option................................................. 16
CN Reports............................................................ 21
CN Representatives.................................................... 44
CN Returns............................................................ 22
CN Securities......................................................... 20
CN Special Limited Voting Shares...................................... 4
CN Stapled Unit....................................................... 4
CN STB Notice......................................................... 58
CN STB Termination Fee................................................ 58
CN Stock Option Agreement............................................. 1
CN Stockholder Meeting................................................ 9
CN Subsidiary Securities.............................................. 20
CN Termination Fee.................................................... 56
CN U.S. Employee Plans................................................ 23
CN Voting Debt........................................................ 20
CN Voting Shares...................................................... 4
Code.................................................................. 4
Commissioner.......................................................... 34
Competition Act....................................................... 4
Confidentiality Agreement............................................. 4
constitutive documents................................................ 4
Cooperation Agreement................................................. 4
Court................................................................. 4
Customary Action...................................................... 4
Delaware Courts....................................................... 59
DGCL.................................................................. 4
vi
<PAGE>
Director.............................................................. 4
Dissent Rights........................................................ 5
Dissenting Shareholder................................................ 5
Environmental Laws.................................................... 5
Environmental Liabilities............................................. 5
ERISA................................................................. 5
ERISA Affiliate....................................................... 5
Exchange Agent........................................................ 13
Exchange Ratio........................................................ 5
Final Order........................................................... 5
Form F-4.............................................................. 35
Form S-3.............................................................. 35
Form S-4.............................................................. 35
Form S-8.............................................................. 35
GAAP.................................................................. 5
Governmental Entity................................................... 5
Hazardous Substances.................................................. 6
Highly Confidential Information....................................... 37
HSR Act............................................................... 6
Implementation Committee.............................................. 39
Interim Order......................................................... 6
IRS................................................................... 6
Law................................................................... 6
Lien.................................................................. 6
material.............................................................. 6
Material Adverse Effect............................................... 6
Material Subsidiary................................................... 6
Merger................................................................ 11
Merger Effective Time................................................. 11
Merger Sub............................................................ 1
NAR Subco............................................................. 6
Newco................................................................. 1
Newco Common Shares................................................... 6
Newco Common Stock.................................................... 7
Newco Elected Exchangeable Share...................................... 15
Newco Replacement Option.............................................. 12
Newco Stapled Unit.................................................... 7
Outside Date.......................................................... 53
PBGC.................................................................. 7
Person................................................................ 7
Plan of Arrangement................................................... 7
SEC................................................................... 7
vii
<PAGE>
Securities Act........................................................ 7
Special Voting Share.................................................. 7
STB................................................................... 19
Stock Option Agreements............................................... 7
Subsidiary............................................................ 7
Surviving Corporation................................................. 11
Tax................................................................... 7
Tax Return............................................................ 8
Trustee............................................................... 8
Voting and Exchange Trust Agreement................................... 8
Year 2000 Compliant................................................... 8
viii
<PAGE>
AMENDED AND RESTATED COMBINATION AGREEMENT
------------------------------------------
This AMENDED AND RESTATED COMBINATION AGREEMENT (this "Agreement"), dated
---------
as of December 18, 1999, is by and among CANADIAN NATIONAL RAILWAY COMPANY, a
Canadian corporation ("CN"), BURLINGTON NORTHERN SANTA FE CORPORATION, a
--
Delaware corporation ("BNSF"), NORTH AMERICAN RAILWAYS, INC., a Delaware
----
corporation owned 50% by CN and 50% by BNSF ("Newco"), and WESTERN MERGER SUB,
-----
INC., a Delaware corporation and a wholly owned subsidiary of Newco ("Merger
------
Sub").
- ---
RECITALS
WHEREAS, this Agreement amends and restates in its entirety the Combination
Agreement, dated as of December 18, 1999 (which shall be deemed to be the date
of this Agreement), by and among BNSF, CN, Newco and Merger Sub;
WHEREAS, the respective boards of directors of each of BNSF, CN, Newco and
Merger Sub have approved and declared advisable this Agreement and the
consummation of the transactions contemplated by this Agreement upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, BNSF's board of directors has received an opinion from Goldman,
Sachs & Co. that the Exchange Ratio (as defined in this Agreement) is fair to
BNSF stockholders from a financial point of view, and CN's board of directors
has received an opinion from Salomon Smith Barney Inc. and Nesbitt Burns Inc.
that the Exchange Ratio is fair to the CN shareholders from a financial point of
view;
WHEREAS, concurrently with the execution and delivery of this Agreement, as
a condition and inducement to each party's willingness to enter into this
Agreement, (i) CN is entering into a stock option agreement with BNSF
substantially in the form and content of Exhibit A (the "CN Stock Option
--------- ---------------
Agreement"), pursuant to which CN has granted to BNSF an option to purchase CN
- ---------
Common Shares (as defined in this Agreement) under the terms and conditions set
forth in the CN Stock Option Agreement, and (ii) BNSF is entering into a stock
option agreement with CN substantially in the form and content of Exhibit B (the
---------
"BNSF Stock Option Agreement"), pursuant to which BNSF has granted to CN an
---------------------------
option to purchase BNSF Common Shares (as defined in this Agreement) under the
terms and conditions set forth in the BNSF Stock Option Agreement; and
WHEREAS, CN, BNSF, Newco and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
---------------------
1.1 Certain Definitions. Terms defined elsewhere in this Agreement shall
-------------------
have the meanings set forth therein for all purposes of this Agreement, unless
otherwise specified to the contrary. The following terms shall have the
following meanings:
"1933 Act" means the United States Securities Act of 1933, as amended.
--------
"1934 Act" means the United States Securities Exchange Act of 1934, as
--------
amended.
"affiliates" has the meaning ascribed to such term in Rule 12b-2 under the
----------
1934 Act.
"Alternative Proposal" means, with respect to any Person, any proposal or
--------------------
offer with respect to a merger, organization, amalgamation, arrangement, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving such Person, or any purchase or
sale of the consolidated assets (including stock of such Person's Subsidiaries)
of such Person or any of its Subsidiaries, taken as a whole, having an aggregate
value equal to 15% or more of its market capitalization, or any purchase or sale
of, or tender or exchange offer for, 15% or more of such Person's or any of such
Person's Subsidiaries' equity securities.
"Arrangement" means an arrangement under Section 192 of the CBCA on the
-----------
terms and subject to the conditions set forth in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with Article
6 of the Plan of Arrangement or Section 10.1 of this Agreement or made at the
------------
direction of the Court in the Final Order.
"Arrangement Effective Date" means the date shown on the certificate of
--------------------------
arrangement to be issued by the Director under the CBCA giving effect to the
Arrangement.
"Arrangement Effective Time" has the meaning ascribed to such term in the
--------------------------
Plan of Arrangement and, as contemplated by Section 2.12, will take place at the
------------
Closing immediately following the Merger Effective Time and after all conditions
set forth in Article VIII (other than those conditions that by their nature are
------------
to be satisfied at the Closing) have been satisfied or waived in accordance with
this Agreement.
"Arrangement Resolution" means the special resolution of the holders of CN
----------------------
Common Shares, to be substantially in the form and content of Exhibit C.
---------
2
<PAGE>
"Articles of Arrangement" means the articles of arrangement of CN in
-----------------------
respect of the Arrangement that are required by the CBCA to be sent to the
Director after the Final Order is entered.
"BNSF Common Shares" means shares of BNSF Common Stock.
------------------
"BNSF Common Stock" means BNSF's common stock, par value $0.01 per share.
-----------------
"BNSF Options" means all options issued by BNSF under its stock plans.
------------
"business day" means any day on which commercial banks are generally open
------------
for business in both New York, New York and Montreal, Quebec, other than a
Saturday, a Sunday or a day observed as a holiday in New York, New York under
the Laws of the State of New York or the federal Laws of the United States or in
Montreal, Quebec under the Laws of the Province of Quebec or the federal Laws of
Canada.
"Canadian GAAP" means the principles stated in the Handbook of the Canadian
-------------
Institute of Chartered Accountants.
"Canadian Securities Regulators" means the securities commissions or other
------------------------------
securities regulatory authorities of the provinces and territories of Canada.
"CBCA" means the Canada Business Corporations Act as now in effect and as
----
it may be amended from time to time.
"Circular" means the notice of the CN Stockholder Meeting and accompanying
--------
management information circular, including all schedules and exhibits thereto,
to be sent to holders of CN Common Shares in connection with the CN Stockholder
Meeting.
"CN Common Shares" means common shares in the capital of CN.
----------------
"CN Exchangeable Shares" means CN's non-voting exchangeable preferred
----------------------
shares having the rights, privileges, restrictions and conditions set forth in
Appendix II to the Plan of Arrangement, the holders of which are the
beneficiaries of certain voting rights in respect of the Special Voting Share
and certain other rights, all as set forth in the Voting and Exchange Trust
Agreement.
"CN Indenture" means the Indenture, dated as of June 23, 1999, as amended
------------
and supplemented by a First Supplement Indenture, dated as of June 23, 1999, as
further amended and supplemented by a Second Supplemental Indenture, dated
February 8, 2000, by and between CN and The Trust Company of Bank of Montreal,
as trustee.
3
<PAGE>
"CN Non-voting Equity Shares" means shares of CN's stock having the rights,
---------------------------
privileges, restrictions and conditions set forth in Appendix IV to the Plan of
Arrangement.
"CN Options" means all options issued by CN under its stock plans.
----------
"CN Special Limited Voting Shares" means shares of CN's stock having the
--------------------------------
rights, privileges, restrictions and conditions set forth in Appendix III to the
Plan of Arrangement.
"CN Stapled Unit" means a unit comprised of one CN Voting Share and one CN
---------------
Exchangeable Share, which unit does not constitute a security independent of the
shares it represents.
"CN Voting Shares" means CN's voting shares having the rights, privileges,
----------------
restrictions and conditions set forth in Appendix I to the Plan of Arrangement.
"Code" means the United States Internal Revenue Code of 1986, as amended.
----
"Competition Act" means the Competition Act (Canada) as now in effect and
---------------
as it may be amended from time to time.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
-------------------------
November 4, 1999, between BNSF and CN.
"constitutive documents" means, with respect to any Person, such Person's
----------------------
articles of incorporation, certificate of incorporation or certificate of
continuance and by-laws, limited liability company agreement or operating
agreement, partnership agreement or other constitutive documents.
"Co-Operation Agreement" means an agreement to be made among Newco and CN
----------------------
and, if applicable, NAR Subco, substantially in the form and content of Exhibit
-------
D, with such changes thereto as the parties to this Agreement, acting
- -
reasonably, may agree.
"Court" means the Quebec Superior Court.
-----
"Customary Action" means an action that occurs in the ordinary course of
----------------
the relevant Person's business, where the taking of such action is generally
recognized as being customary and prudent for other major enterprises in such
Person's line of business.
"DGCL" means the Delaware General Corporation Law as now in effect and as
----
it may be amended from time to time.
"Director" means the Director appointed pursuant to Section 260 of the
--------
CBCA.
4
<PAGE>
"Dissent Rights" has the meaning ascribed to such term in the Plan of
--------------
Arrangement.
"Dissenting Shareholder" has the meaning ascribed to such term in the Plan
----------------------
of Arrangement.
"Environmental Laws" means any and all multinational, federal, provincial,
------------------
state, regional, local and foreign Laws, whether now or hereafter in effect,
relating to human health, the environment or emissions, discharges or releases
of pollutants, contaminants, Hazardous Substances or wastes into the
environment, including ambient air, surface water, groundwater 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" means, with respect to any Person, any and all
-------------------------
liabilities of or relating to such Person or any of its Subsidiaries (including
any entity that 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, that (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 Closing Date.
"ERISA" means the United States Employee Retirement Income Security Act of
-----
1974, as amended.
"ERISA Affiliate" of any Person means any other Person that, together with
---------------
such Person, would be treated as a single employer under Section 414 of the
Code.
"Exchange Ratio" means 1.05.
--------------
"Final Order" means the final order of the Court approving the Arrangement,
-----------
as such order may be amended by the Court at any time prior to the Arrangement
Effective Date or, if appealed, then, unless such appeal is withdrawn or denied,
as affirmed.
"Form F-4" has the meaning set forth in Section 5.3(b).
-------- --------------
"Form S-4" has the meaning set forth in Section 5.3(b).
-------- --------------
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Entity" means any (i) multinational, federal, provincial,
-------------------
state, regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau or agency, domestic or foreign; (ii) any subdivision, agent, commission,
board, or authority of any of the foregoing; or (iii) any quasi-
5
<PAGE>
governmental or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing.
"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 consistent elements displaying any of
the foregoing characteristics, including any substance regulated under
Environmental Laws.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements
-------
Act of 1976, as amended.
"Interim Order" means the interim order of the Court, as the same may be
-------------
amended, in respect of the Arrangement.
"IRS" means the United States Internal Revenue Service.
---
"Law" means any law, statute, ordinance, regulation, judgment, order,
---
decree, injunction, arbitration award, license, authorization, opinion, agency
requirement or permit of any Governmental Entity or common law.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset.
"material" means, except as expressly provided otherwise in this Agreement,
--------
in reference to any event, change, effect, agreement, plan or arrangement with
respect to a Person, an event, change, effect, agreement, plan or arrangement,
whether existing or prospective, that is material in relation to the financial
condition, business or properties of such Person and its Subsidiaries, taken as
a whole, or on the ability of such Person to perform its obligations under this
Agreement.
"Material Adverse Effect" means, with respect to any Person, a material
-----------------------
adverse effect, whether existing or prospective, on the financial condition,
business or properties of such Person and its Subsidiaries, taken as a whole, or
on the ability of such Person to perform its obligations under this Agreement.
"Material Subsidiary" means any Subsidiary of CN or BNSF, as the case may
-------------------
be, with at least $100 million of net assets.
"NAR Subco" means an unlimited liability company to be formed under the
---------
laws of the Province of Nova Scotia, Canada, and a wholly owned Subsidiary of
Newco.
"Newco Common Shares" means shares of Newco Common Stock.
-------------------
6
<PAGE>
"Newco Common Stock" means Newco's common stock, par value $0.01 per share.
------------------
"Newco Stapled Unit" means an inseparable unit consisting of one Newco
------------------
Common Share and one CN Voting Share, which unit does not constitute a security
independent of the shares it represents.
"PBGC" means the United States Pension Benefit Guaranty Corporation.
----
"Person" means any individual, corporation (including not-for-profit),
------
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity or other entity of
any kind or nature.
"Plan of Arrangement" means the plan of arrangement substantially in the
-------------------
form and content of Exhibit E and any amendments or variations thereto made in
---------
accordance with Article 6 of the Plan of Arrangement or Section 10.1 of this
------------
Agreement or made at the direction of the Court in the Final Order.
"SEC" means the United States Securities and Exchange Commission.
---
"Securities Act" means the Securities Act (Ontario) and the rules,
--------------
regulations and policies made thereunder, as now in effect and as they may be
amended from time to time.
"Special Voting Share" means the single share of Newco special voting stock
--------------------
having substantially the rights, privileges, restrictions and conditions
described in the Voting and Exchange Trust Agreement.
"Stock Option Agreements" means the CN Stock Option Agreement and the BNSF
-----------------------
Stock Option Agreement.
"Subsidiary" means, with respect to any Person, any entity, whether
----------
incorporated or unincorporated, of which more than 50% of the stock, securities
or other ownership interests having by their terms ordinary voting power to
elect more than 50% of the board of directors or other persons performing
similar functions is directly or indirectly owned by such Person.
"Tax" means all income, profits, franchise, gross receipts, environmental,
---
customs duty, capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value-
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect of such penalties and
additions.
7
<PAGE>
"Tax Return" means all returns and reports (including elections,
----------
declarations, disclosures, schedules, estimated returns and information returns)
required to be supplied to a taxing authority relating to Taxes.
"Trustee" means the trustee to be chosen jointly by BNSF and CN, acting
-------
reasonably, to act as trustee under the Voting and Exchange Trust Agreement,
being a corporation organized and existing under the Laws of Canada and
authorized to carry on the business of a trust company in all of the provinces
of Canada, and any successor trustee appointed under the Voting and Exchange
Trust Agreement.
"Voting and Exchange Trust Agreement" means an agreement to be made among
-----------------------------------
Newco, CN and the Trustee in connection with the Plan of Arrangement,
substantially in the form and content of Exhibit F, with such changes thereto as
---------
the parties to this Agreement, acting reasonably, may agree.
"Year 2000 Compliant" means, with respect to any Person, except for any
-------------------
noncompliance that, individually or in the aggregate, would not be reasonably
likely to cause a Material Adverse Effect on such Person, that the hardware or
software used by such Person or any of its Subsidiaries, including microcode,
firmware, system and application programs, files, databases, computer services
and microcontrollers, including those embedded in computer and non-computer
equipment, will (i) process date data from, before and after January 1, 2000
without error or interruption; (ii) maintain functionality with respect to the
introduction processing or output of records containing dates falling on or
after January 1, 2000; and (iii) be interoperable with other Year 2000 Compliant
hardware or software that may deliver records to, receive records from or
interact with such hardware or software.
1.2 Other Definitional Provisions. (a) Unless otherwise specified to the
-----------------------------
contrary, all references to Articles and Sections are references to Articles and
Sections of this Agreement. All references to Exhibits are references to
Exhibits to this Agreement.
(b) Terms defined in the singular have a comparable meaning when used in
the plural, and vice versa.
(c) The words "include," "includes" and "including" mean include, includes
------- -------- ---------
and including without limitation.
(d) The terms "dollars" and "$" mean United States dollars.
------- -
8
<PAGE>
ARTICLE II
THE BUSINESS COMBINATION
------------------------
2.1 Implementation Steps by CN. (a) Subject to Section 2.7, as soon as
-------------------------- -----------
reasonably practicable after the date of this Agreement, CN shall apply under
Section 192 of the CBCA for an order approving the Arrangement and for the
Interim Order and, thereafter, proceed with and diligently seek the Interim
Order.
(b) CN shall cause a special meeting of its stockholders (the "CN
--
Stockholder Meeting") to be duly called and held as promptly as reasonably
- -------------------
practicable after the date of this Agreement for the purpose of voting on the
approval and adoption of the Arrangement Resolution and for any other proper
purpose as may be set forth in the notice for such meeting. Without limiting the
generality of the foregoing, CN and BNSF agree that the CN Stockholder Meeting
shall be held as promptly as reasonably practicable after the Form S-4 and the
Form F-4 are declared effective and the Circular is legally permitted to be
disseminated to CN stockholders. The board of directors of CN shall recommend
approval and adoption of the Arrangement Resolution by its stockholders and take
all lawful action (including the solicitation of proxies) to solicit such
adoption; provided, however, that, prior to the CN Stockholder Meeting, such
-------- -------
recommendation may be withdrawn, modified or changed to the extent that the
board of directors of CN, after consulting with its counsel, deems it necessary
to do so in the exercise of its fiduciary obligations to CN or its shareholders;
provided further, that CN shall give BNSF at least five business days' written
- ----------------
notice prior to making any public announcement or other dissemination of any
withdrawal, modification or change of the recommendation of CN's board of
directors (the "CN Five Business Day Window"). Regardless of whether CN's board
---------------------------
of directors has withdrawn, modified or changed its recommendation to CN
stockholders regarding the approval of the Arrangement Resolution, CN shall as
promptly as practicable after the Form S-4 and the Form F-4 are declared
effective and the Circular is disseminated to CN stockholders duly convene and
complete the CN Stockholder Meeting and cause a vote of the CN stockholders to
be taken at such CN Stockholder Meeting regarding the approval of the
Arrangement Resolution. Notwithstanding anything to the contrary in this
Agreement, CN may schedule the CN Stockholder Meeting so that it is on the same
day as the BNSF Stockholder Meeting.
(c) Subject to obtaining such approvals as are required by the Interim
Order, CN shall proceed with and diligently pursue the application to the Court
for the Final Order.
(d) Subject to obtaining the Final Order and the satisfaction or waiver of
the other conditions contained in this Agreement, CN shall send to the Director,
for endorsement and filing by the Director, the Articles of Arrangement and such
other documents as may be required in connection therewith under the CBCA to
give effect to the Arrangement.
9
<PAGE>
(e) At the Closing, CN shall execute and deliver the Co-Operation
Agreement and the Voting and Exchange Trust Agreement.
(f) At the Closing and pursuant to and in accordance with the Arrangement,
CN shall issue the appropriate number and classes of CN securities to be issued
in the Arrangement.
(g) At the Closing and pursuant to and in accordance with the terms of
this Agreement, CN shall issue the appropriate number of CN Voting Shares to be
delivered to the Persons entitled to receive Newco Common Shares pursuant to the
Merger.
2.2 Implementation Steps by BNSF. (a) Promptly following the execution
----------------------------
of this Agreement, BNSF shall adopt a shareholder rights plan substantially in
the form and content of Exhibit G (the "BNSF Shareholder Rights Plan").
--------- ----------------------------
(b) BNSF shall cause a special meeting of its stockholders (the "BNSF
----
Stockholder Meeting") to be duly called and held as promptly as reasonably
- -------------------
practicable after the date of this Agreement for the purpose of voting on the
approval and adoption of this Agreement and the transactions contemplated by
this Agreement, including the Merger, and for any other proper purpose as may be
set forth in the notice for such meeting. Without limiting the generality of
the foregoing, CN and BNSF agree that the BNSF Stockholder Meeting shall be held
as promptly as reasonably practicable after the Form S-4 and the Form F-4 are
declared effective and the BNSF proxy statement is legally permitted to be
disseminated to BNSF stockholders. The board of directors of BNSF shall
recommend approval and adoption of this Agreement and the transactions
contemplated by this Agreement by its stockholders and take all lawful action
(including the solicitation of proxies) to solicit such adoption; provided,
--------
however, that, prior to the BNSF Stockholder Meeting, such recommendation may be
- -------
withdrawn, modified or changed to the extent that the board of directors of
BNSF, after consulting with its counsel, deems it necessary to do so in the
exercise of its fiduciary obligations to BNSF or its stockholders; provided
--------
further, that BNSF shall give CN at least five business days' written notice
- -------
prior to making any public announcement or other dissemination of any
withdrawal, modification or change of the recommendation of BNSF's board of
directors (the "BNSF Five Business Day Window"). Regardless of whether BNSF's
-----------------------------
board of directors has withdrawn, modified or changed its recommendation to BNSF
stockholders regarding the adoption of this Agreement or the approval of the
transactions contemplated by this Agreement, BNSF shall as promptly as
practicable after the Form S-4 and Form F-4 are declared effective and the BNSF
proxy statement is disseminated to BNSF stockholders duly convene and complete
the BNSF Stockholder Meeting and cause a vote of the BNSF stockholders to be
taken at such BNSF Stockholder Meeting regarding the adoption of this Agreement
and the approval of the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary in this Agreement, BNSF may schedule
the BNSF Stockholder Meeting so that it is on the same day as the CN Stockholder
Meeting.
10
<PAGE>
(c) At the Closing, BNSF and Merger Sub shall effect the Merger
contemplated by Section 2.4.
-----------
2.3 Implementation Steps by Newco and Merger Sub. (a) At the Closing and
--------------------------------------------
immediately prior to the Merger Effective Time, BNSF and CN shall cause (i) the
certificate of incorporation of Newco to be restated in its entirety,
substantially in the form and content of the restated certificate of
incorporation attached as Exhibit H, and (ii) the by-laws of Newco to be amended
---------
and restated in their entirety in such form as CN and BNSF shall mutually and
reasonably agree (it being understood that, subject to clause (y) of this
parenthetical, the by-laws of Newco (x) shall be in customary form for a
Delaware corporation and (y) shall in all respects be consistent with the terms
of the restated certificate of incorporation of Newco referred to in this
Section 2.3(a) and the other terms of this Agreement and all exhibits to this
- --------------
Agreement).
(b) At the Closing, Newco shall execute and deliver the Co-Operation
Agreement and the Voting and Exchange Trust Agreement.
(c) At the Closing, Newco shall issue to the Trustee the Special Voting
Share.
(d) At the Closing, Newco shall issue the appropriate number of Newco
Common Shares to be issued in the Arrangement and the Merger.
(e) At the Closing, BNSF and Merger Sub shall effect the Merger
contemplated by Section 2.4.
-----------
2.4 Merger of BNSF. (a) At the Closing, Merger Sub shall merge (the
--------------
"Merger") with and into BNSF and the separate corporate existence of Merger Sub
------
shall thereupon cease. BNSF shall be the surviving corporation in the Merger
(sometimes referred to as the "Surviving Corporation"), shall be a wholly owned
---------------------
Subsidiary of Newco and shall continue to be governed by the Laws of the State
of Delaware, and the separate corporate existence of BNSF with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger, except as set forth in Section 2.4(d). The Merger shall have the
--------------
effects specified in Section 259 of the DGCL.
(b) The Merger shall become effective upon the filing, in the office of
the Secretary of State of the State of Delaware, of a certificate of merger in
accordance with the DGCL or at such later date and time as may be set forth in
such certificate of merger (the "Merger Effective Time").
---------------------
(c) At the Merger Effective Time, automatically by virtue of the Merger
and without any action on the part of any party or other Person:
11
<PAGE>
(i) Each BNSF Common Share that is not owned by BNSF or any
Subsidiary of BNSF outstanding immediately prior to the Merger Effective
Time shall automatically be converted into the right to receive one Newco
Common Share, and the holder of each such BNSF Common Share shall cease to
have any rights as a stockholder of BNSF. Each certificate formerly
representing any of such BNSF Common Shares thereafter shall constitute a
certificate representing the right to receive an equivalent number of Newco
Common Shares.
(ii) Each BNSF Common Share that is owned by BNSF or any Subsidiary
of BNSF immediately prior to the Merger Effective Time and, in each case,
not held as a custodian on behalf of third parties under the terms of any
BNSF Employee Plan (such custodial shares to be converted pursuant to
clause (i) above), shall no longer be outstanding, shall be canceled and
retired without payment of any consideration therefor, and shall cease to
exist.
(iii) Each BNSF Option outstanding immediately prior to the Merger
Effective Time shall automatically be converted into an option (a "Newco
-----
Replacement Option") to purchase that number of Newco Stapled Units equal
------------------
to the number of BNSF Common Shares subject to such BNSF Option immediately
prior to the Merger Effective Time. Each Newco Replacement Option shall
provide for an exercise price per Newco Stapled Unit equal to the exercise
price per BNSF Common Share of the BNSF Option from which it was converted.
The expiration date, manner of exercising, and all other terms and
conditions of such Newco Replacement Option shall otherwise be unchanged
from those of the BNSF Option from which it was converted, and any document
or agreement previously evidencing such BNSF Option shall thereafter
evidence and be deemed to evidence such Newco Replacement Option.
(iv) Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Merger Effective Time shall be
converted into one share of common stock of the Surviving Corporation, and
the Surviving Corporation shall thereby become a wholly owned Subsidiary of
Newco.
(v) Each share of capital stock of Newco issued and outstanding
immediately prior to the Merger Effective Time shall no longer be
outstanding, shall be canceled and retired without payment of any
consideration therefor, and shall cease to exist.
(d) The certificate of incorporation of BNSF shall be amended in the
Merger to read in its entirety as set forth on Exhibit I and, as so amended,
---------
shall be the certificate of incorporation of the Surviving Corporation until
amended in accordance with applicable Law. The by-laws of BNSF shall be amended
in the Merger to read in their entirety as set forth on Exhibit J and, as so
---------
amended, shall be the by-laws of the Surviving Corporation until amended in
accordance with applicable Law.
12
<PAGE>
(e) The initial directors and officers of the Surviving Corporation shall
consist of the directors and officers of Merger Sub immediately prior to the
Merger Effective Time.
2.5 Surrender of BNSF Common Shares. (a) Prior to the Merger Effective
-------------------------------
Time, CN and BNSF shall jointly appoint an agent (the "Exchange Agent") for the
--------------
purpose of exchanging certificates formerly representing BNSF Common Shares as
provided in Section 2.4(c). At the Arrangement Effective Time and in a manner
--------------
consistent with applicable Law, Newco and CN shall jointly cause to be deposited
with the Exchange Agent Newco Stapled Unit certificates representing the
aggregate number of Newco Common Shares and the aggregate number of CN Voting
Shares to be delivered to holders of BNSF Common Shares. Promptly after the
Arrangement Effective Time, BNSF and CN shall cause the Exchange Agent to send
to each holder of BNSF Common Shares at the Merger Effective Time a letter of
transmittal for use in such exchange, which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing BNSF Common Shares to the Exchange
Agent.
(b) Each holder of BNSF Common Shares that have been converted into the
right to receive Newco Common Shares, upon surrender to the Exchange Agent of a
certificate or certificates representing such BNSF Common Shares, together with
a properly completed letter of transmittal covering such BNSF Common Shares,
shall be entitled, after the Arrangement Effective Time, to receive that number
of Newco Stapled Units equal to the number of BNSF Common Shares formerly
represented by such surrendered certificate or certificates. Until so
surrendered, each such certificate shall, after the Arrangement Effective Time,
represent for all purposes only the right to receive such Newco Stapled Units.
Newco shall not be obligated to issue Newco Common Shares except in connection
with the issuance of Newco Stapled Units.
(c) If any portion of the Newco Stapled Units is to be delivered to a
Person other than the registered holder of the BNSF Common Shares represented by
the certificate or certificates surrendered in respect thereto, it shall be a
condition to such delivery that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such delivery shall pay to the Exchange Agent any transfer
or other Taxes required as a result of such delivery to a Person other than the
registered holder of such BNSF Common Shares or establish to the satisfaction of
the Exchange Agent that such Tax has been paid or is not payable.
(d) After the Merger Effective Time, there shall be no further
registration of transfers of BNSF Common Shares. If, after the Arrangement
Effective Time, certificates representing BNSF Common Shares are presented to
the Surviving Corporation, they shall be canceled and Newco Stapled Units shall
be delivered in accordance with the procedures set forth in this Section 2.5.
-----------
13
<PAGE>
(e) Any Newco Stapled Units deposited with the Exchange Agent pursuant to
this Section 2.5 that remain unclaimed by the holders of BNSF Common Shares
-----------
twelve months after the Merger Effective Time shall be returned to Newco (with
respect to the Newco Common Shares comprising a part of the Newco Stapled Units)
and to CN (with respect to the CN Voting Shares comprising a part of the Newco
Stapled Units) upon demand, and any such holder who has not exchanged his BNSF
Common Shares for Newco Stapled Units in accordance with this Section 2.5 prior
-----------
to that time shall thereafter look only to Newco and CN for his claim for Newco
Stapled Units and only to Newco for his claim for any dividends or distributions
with respect to Newco Common Shares. Notwithstanding the foregoing, Newco and
CN shall not be liable to any holder of BNSF Common Shares for any amount paid
to a public official pursuant to applicable abandoned property Laws.
(f) No dividends or other distributions with respect to Newco Common
Shares shall be paid to the holder of any unsurrendered certificates formerly
representing BNSF Common Shares until such certificates are surrendered as
provided in this Section 2.5. Upon such surrender, there shall be paid, without
-----------
interest, to the Person in whose name the Newco Stapled Unit certificates in
respect of which such BNSF Common Shares were surrendered are registered (i) all
dividends and other distributions in respect of Newco Common Shares that are
payable on a date subsequent to, and the record date for which occurs at or
after, the Merger Effective Time and (ii) all dividends or other distributions
in respect of BNSF Common Shares that are payable on a date subsequent to, and
the record date for which occurs before, the Merger Effective Time.
2.6 Interim Order. The notice of motion for the application referred to
-------------
in Section 2.1(a) shall request that the Interim Order provide (i) for the class
--------------
of Persons to whom notice is to be provided in respect of the Arrangement and
the CN Stockholder Meeting and for the manner in which such notice is to be
provided; (ii) that the requisite approval for the Arrangement Resolution shall
be two-thirds of the votes cast on the Arrangement Resolution by holders of CN
Common Stock and holders of CN Options voting together as a single class present
in person or by proxy at the CN Stockholder Meeting; and (iii) for the grant of
the Dissent Rights.
2.7 The Arrangement. The Arrangement shall provide that, and the parties
---------------
covenant to take such steps as are necessary to ensure that, commencing at the
Arrangement Effective Time, the following shall occur and shall be deemed to
occur in the following order:
(a) The authorized share capital of CN shall be reorganized by the
creation of the following four classes of shares in the capital of CN;
(i) a class of shares, designated as CN Voting Shares, the authorized
number of which shall be unlimited;
14
<PAGE>
(ii) a class of shares, designated as CN Exchangeable Shares, the
authorized number of which shall be unlimited;
(iii) a class of shares, designated as CN Special Limited Voting
Shares, the authorized number of which shall be unlimited; and
(iv) a class of shares, designated as CN Non-voting Equity Shares,
the authorized number of which shall be unlimited.
(b) Each outstanding CN Common Share shall be changed into a number of CN
Voting Shares equal to the Exchange Ratio and a number of CN Exchangeable Shares
equal to the Exchange Ratio.
(c) Simultaneously with the change in share capital under Section 2.7(b),
--------------
each CN Exchangeable Share to which the holder of a CN Common Share is entitled
and with respect to which such holder has elected, in a duly completed and
timely submitted letter of transmittal and election form, to transfer to NAR
Subco for a Newco Common Share (the CN Exchangeable Share with respect to which
such election was made, a "Newco Elected Exchangeable Share") shall be
--------------------------------
transferred by the holder thereof, without any further act or formality on such
holder's part, to NAR Subco in exchange for one Newco Common Share issued by
Newco. Notwithstanding the foregoing, each holder of CN Common Shares who is
not a resident of Canada for purposes of the Income Tax Act (Canada) at the
Election Deadline (as defined in the Plan of Arrangement) shall be deemed to
have elected to exchange all of the CN Exchangeable Shares issuable to such
holder pursuant to the Arrangement for Newco Common Shares and the CN
Exchangeable Shares to which such holder is entitled shall be deemed for all
purposes to be Newco Elected Exchangeable Shares, except where and to the extent
that such holder specifically elects in a duly completed and timely submitted
letter of transmittal and election form not to have such exchange occur.
(d) Simultaneously with the change in share capital under Section 2.7(b)
--------------
and the transfer to Newco and exchange under Section 2.7(c) of the Newco Elected
--------------
Exchangeable Shares, each Newco Elected Exchangeable Share shall be converted
into one CN Special Limited Voting Share and one CN Non-voting Equity Share.
(e) Simultaneously with the change in share capital under Section 2.7(b),
--------------
the transfer to NAR Subco and exchange under Section 2.7(c) of the Newco Elected
--------------
Exchangeable Shares and the conversion under Section 2.7(d) of the Newco Elected
--------------
Exchangeable Shares, NAR Subco shall and shall be deemed to have subscribed for
and agreed to purchase and CN shall issue and sell to NAR Subco one (1) CN
Special Limited Voting Share and one (1) CN Non-voting Equity Share upon payment
by NAR Subco to CN of a sum equal to the closing trading price, per share, of
the CN Common Shares on The Toronto Stock Exchange on the
15
<PAGE>
trading day which is two days prior to the Arrangement Effective Date divided by
the Exchange Ratio.
(f) The Persons entitled to receive Newco Common Shares pursuant to the
Merger at the Merger Effective Time, which for greater certainty shall exclude
Newco Common Shares issued pursuant to the exchange provided for in Section
-------
2.7(c), shall be deemed to have subscribed for and agreed to purchase at a
- ------
purchase price of $0.05 per share, or such other amount as to which the parties
may agree, and CN shall issue to each such Person, one (1) CN Voting Share for
each such Newco Common Share upon payment by Newco to CN of the aggregate
subscription price therefor.
(g) Newco shall issue to and deposit with the Trustee the Special Voting
Share, in consideration of the payment to Newco of $0.01 by CN, to be thereafter
held of record by the Trustee as trustee for and on behalf of, and for the use
and benefit of, the holders of the CN Exchangeable Shares in accordance with the
Voting and Exchange Trust Agreement.
(h) Each CN Option shall be exchanged for an option (a "CN Replacement
--------------
Option") to purchase that number of Newco Stapled Units equal to the product of
- ------
the Exchange Ratio multiplied by the number of CN Common Shares subject to such
CN Option immediately prior to the Arrangement Effective Time. Each CN
Replacement Option shall provide for an exercise price per Newco Stapled Unit
equal to the exercise price per CN Common Share of such CN Option immediately
prior to the Arrangement Effective Time divided by the Exchange Ratio. If the
foregoing calculation results in a CN Replacement Option being exercisable for a
fraction of a Newco Stapled Unit, then the number of Newco Stapled Units subject
to such CN Replacement Option shall be rounded up to the next whole number of
Newco Stapled Units. The term to expiry, conditions to and manner of
exercising, vesting schedule, and all other terms and conditions of such CN
Replacement Option shall otherwise be unchanged from those of the CN Option for
which it was exchanged, and any document or agreement previously evidencing such
CN Option shall thereafter evidence and be deemed to evidence such CN
Replacement Option.
(i) The authorized share capital of CN shall be amended by the elimination
of the CN Common Shares as a class of authorized shares.
2.8 CN Convertible Preferred Securities. At the Closing, Newco shall
-----------------------------------
enter into a supplemental indenture to the CN Indenture pursuant to which Newco
shall agree to become a co-obligor with respect to CN's 5.25% Convertible
Preferred Securities due June 30, 2029 (the "CN Preferred Securities"). CN, BNSF
-----------------------
and Newco agree and acknowledge that, under the terms of the CN Indenture, from
and after the Arrangement Effective Time, (1) each CN Preferred Security shall
be convertible into, at the option of the holder of such CN Preferred Security,
either Newco Stapled Units or CN Stapled Units and shall no longer be
convertible into CN Common Shares and (2) the number of shares of Newco Stapled
Units or CN Stapled Units, as
16
<PAGE>
the case may be, into which each CN Preferred Security shall be convertible
shall be determined pursuant to the provisions of the CN Indenture.
2.9 Board of Directors; Management. (a) Immediately prior to the Merger
------------------------------
Effective Time, the parties shall cause the board of directors of CN and the
board of directors of Newco, respectively, to be identical and composed of
fifteen members, six of whom shall be designated by BNSF, six of whom shall be
designated by CN and three of whom shall be jointly designated by agreement
between BNSF and CN. Unless BNSF agrees otherwise, all of CN's designees to the
board of directors of CN and the board of directors of Newco shall be resident
Canadians, as defined in the CBCA. The six BNSF designees are: John J. Burns,
Jr.; Robert D. Krebs; Roy S. Roberts; J. Steven Whisler; Edward E. Whitacre,
Jr.; and Michael B. Yanney. The six CN designees are: Purdy Crawford; J.V.
Raymond Cyr; The Honorable Edward C. Lumley; David G.A. McLean; Robert Pace; and
Paul M. Tellier. The three jointly designated directors are: Laurent Beaudoin;
Steve Burd; and Jean C. Monty. To the extent any of the foregoing are unable or
unwilling to serve as directors at the time of Closing, replacements shall be
selected in accordance with the first two sentences of this Section 2.9(a).
--------------
(b) At the Closing, the parties shall cause the following officers of CN
and Newco to be identical: (i) Paul M. Tellier, the President and Chief
Executive Officer of CN, to be the President and Chief Executive Officer of CN
and Newco if he is willing and able to serve in that capacity; (ii) Robert D.
Krebs, the Chairman and Chief Executive Officer of BNSF, to be the Chairman of
CN and Newco if he is willing and able to serve in that capacity; (iii) E.
Hunter Harrison, the Executive Vice President and Chief Operating Officer of CN,
to be the Chief Operating Officer of Newco and CN if he is willing and able to
serve in that capacity; and (iv) Thomas N. Hund, the Senior Vice President and
Chief Financial Officer of BNSF, to be the Chief Financial Officer of Newco and
CN if he is willing and able to serve in that capacity. In addition, Matthew K.
Rose, the President and Chief Operating Officer of BNSF, will be the President
and Chief Executive Officer of BNSF if he is willing and able to serve in that
capacity. The remaining officers of CN and Newco to be appointed to office at
the Closing shall include representatives of both CN and BNSF and shall be
agreed on by the boards of directors of Newco and CN to take offices at the
Closing after receiving advice from the Chief Executive Officer of Newco and CN
to take offices at the Closing, after consultation with the Chairman of Newco
and CN to take offices at the Closing.
2.10 Head Office. The head office of each of CN and Newco following the
-----------
Closing shall be situated in the Montreal Urban Community, Quebec, Canada.
2.11 Withholding Rights. Each of CN, BNSF, Newco and the Surviving
------------------
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article II such amounts as it
----------
is required to deduct and withhold with respect to the making of such payment
under any provision of applicable Law. Any amounts so withheld shall be treated
for all purposes of this Agreement as having been paid to the holder of CN
17
<PAGE>
Common Shares or BNSF Common Shares, as the case may be, in respect of which
such deduction and withholding was made.
2.12 The Closing. Unless otherwise mutually agreed in writing, the
-----------
closing of the transactions contemplated by this Agreement (the "Closing") shall
-------
take place at 9:00 a.m., Chicago time, at the offices of Mayer, Brown & Platt,
190 South LaSalle Street, Chicago, Illinois and, for Canadian matters, at the
offices of Stikeman, Elliott, Suite 5300, Commerce Court West, Toronto, Ontario
M5L 1B9, on the date (the "Closing Date") as promptly as practicable (but not
------------
later than two business days) after the date on which the last to be fulfilled
or waived of the conditions set forth in Article VIII (other than those
------------
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions) shall be satisfied or waived
in accordance with this Agreement or such other date, time and place as the
parties may agree. The parties shall cause the Merger Effective Time to occur
immediately prior to the Arrangement Effective Time, the Arrangement Effective
Time to occur immediately following the Merger Effective Time, and both the
Merger Effective Time and the Arrangement Effective Time to occur during the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CN
------------------------------------
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date of this Agreement, delivered by CN to BNSF
(the "CN Disclosure Letter"), CN represents and warrants to BNSF as follows:
--------------------
3.1 Corporate Existence and Power. CN is a corporation duly
-----------------------------
incorporated, validly existing and in good standing under the Laws of Canada,
and has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. CN is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect on CN. Prior to the date of this Agreement, CN has made
available to BNSF true and complete copies of CN's constitutive documents, each
as amended to date, and such constitutive documents are in full force and
effect.
3.2 Corporate Authorization. The execution, delivery and performance of
-----------------------
this Agreement and the Stock Option Agreements by CN and the consummation by CN
of the transactions contemplated hereby and thereby are within CN's corporate
powers and, except as set forth in the next sentence, have been duly authorized
by all necessary corporate action. The affirmative vote of two-thirds of the
votes cast on the Arrangement Resolution by holders of CN Common Shares and the
holders of CN Options voting together as a single class is the only vote of any
class or series of CN capital stock necessary to consummate the Arrangement.
This
18
<PAGE>
Agreement has been duly executed and delivered by CN and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency and other applicable Laws affecting
creditors' rights generally and general principles of equity.
3.3 Governmental Authorization. The execution, delivery and performance
--------------------------
by CN of this Agreement and the Stock Option Agreements and the consummation by
CN of the transactions contemplated hereby and thereby require no action by or
in respect of, or filing with, any Governmental Entity other than (i) any
approvals required by the Interim Order; (ii) the Final Order; (iii) filings
with the Director under the CBCA; (iv) compliance with any applicable
requirements of the HSR Act and the Competition Act; (v) compliance with any
applicable requirements relating to approval of the transactions contemplated by
this Agreement by the Surface Transportation Board (the "STB"); (vi) compliance
---
with any applicable requirements of the 1933 Act, the 1934 Act and the
Securities Act; (vii) compliance with any applicable United States "blue sky" or
Canadian provincial securities Laws; (viii) immaterial actions or filings
relating to ordinary operational matters; (ix) approval by The Toronto Stock
Exchange of the grant of the option by CN to BNSF under the CN Stock Option
Agreement and the issuance of CN Common Shares thereunder and (x) compliance
with any applicable requirements of the Defense Production Act of 1950, as
amended (commonly known as Exon-Florio).
3.4 Non-Contravention. The execution, delivery and performance by CN of
-----------------
this Agreement and the Stock Option Agreements and the consummation by CN of the
transactions contemplated hereby and thereby do not and will not (except in the
case of clauses (ii), (iii) and (iv) of this Section 3.4, for any such matters
-----------
that individually or in the aggregate would not be reasonably likely to have a
Material Adverse Effect on CN) (i) contravene or conflict with CN's constitutive
documents; (ii) assuming compliance with the matters referred to in Section 3.3,
-----------
contravene or conflict with, or constitute a violation of, any provision of any
Law binding upon or applicable to CN or any of its Subsidiaries; (iii)
constitute a default under, or give rise to a right of termination, cancellation
or acceleration of, any right or obligation of CN or any of its Subsidiaries or
to a loss of any benefit to which CN or any of its Subsidiaries is entitled
under any provision of any agreement, contract or other instrument binding upon
CN or any of its Subsidiaries, or any license, franchise, permit or other
similar authorization held by CN or any of its Subsidiaries; or (iv) result in
the creation or imposition of any Lien on any asset of CN or any of its
Subsidiaries.
3.5 Capitalization. (a) The authorized capital stock of CN consists of
--------------
(i) an unlimited number of CN Common Shares, (ii) an unlimited number of Class A
Preferred Shares ("CN Class A Preferred Shares"), and (iii) an unlimited number
---------------------------
of Class B Preferred Shares, no par value ("CN Class B Preferred Shares"). As
---------------------------
of December 15, 1999, there were outstanding (i) 202,270,686 CN Common Shares,
(ii) no CN Class A Preferred Shares, (iii) no CN Class B Preferred Shares, and
(iv) CN Options to purchase an aggregate of 8,473,402 CN Common Shares (of which
CN Options to purchase an aggregate of approximately 4,072,616 CN Common
19
<PAGE>
Shares were exercisable). All outstanding shares of CN's capital stock have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section 3.5 and except for the 5.25% Convertible Preferred
-----------
Securities due June 30, 2029 of CN or as contemplated by Section 6.1, and except
-----------
for the exercise of CN Options outstanding on December 15, 1999, or issued since
that date in accordance with Section 6.1, there are outstanding (x) no shares of
-----------
capital stock or other voting securities of CN, (y) no securities of CN or any
of its Subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of CN and (z) no options or other rights to acquire from CN
or any of its Subsidiaries, and no obligation of CN or any of its Subsidiaries
to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of CN (the items in clauses
(x), (y) and (z) being referred to collectively as the "CN Securities"). There
-------------
are no outstanding obligations of CN or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any CN Securities, except for the transactions
contemplated by this Agreement.
(b) As of the date of this Agreement, there are no outstanding bonds,
debentures, notes or other indebtedness of CN having the right to vote (or
convertible into or exercisable for CN Securities having the right to vote) on
any matters upon which holders of CN Common Stock may vote (collectively, the
"CN Voting Debt").
- ---------------
3.6 Material Subsidiaries. Each of CN's Material Subsidiaries has been
---------------------
duly incorporated or formed under all applicable Laws, is validly existing and
in good standing under the Laws of its jurisdiction and has full corporate or
legal power and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted. Each of CN's
Material Subsidiaries is duly qualified to do business and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect on
CN. All of the outstanding shares and other ownership interests of CN's
Material Subsidiaries that are held directly or indirectly by CN are validly
issued, fully paid and nonassessable; all such shares and other ownership
interests are owned directly or indirectly by CN, free and clear of all material
Liens and free of any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). Other than those obligations identified in Section 3.6 of
-----------
the CN Disclosure Letter, there are no outstanding (i) securities of CN or any
of its Subsidiaries convertible into or exchangeable for shares of capital stock
or other voting securities or ownership interests in any Subsidiary of CN or
(ii) options or other rights to acquire from CN or any of its Subsidiaries, and
no other obligation of CN or any of its Subsidiaries to issue, any capital stock
or voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any Subsidiary of CN (the capital stock of each
Subsidiary of CN, together with the items in clauses (i) and (ii), being
referred to collectively as the "CN Subsidiary Securities"). There are no
------------------------
outstanding
20
<PAGE>
obligations of CN or any Subsidiary of CN to repurchase, redeem or otherwise
acquire any outstanding CN Subsidiary Securities.
3.7 Canadian Securities Filings and SEC Filings. CN has filed with the
-------------------------------------------
Canadian Securities Regulators and the SEC true and complete copies of all
forms, reports, schedules, statements and other documents required to be filed
by it since January 1, 1997 (such forms, reports, schedules, statements and
other documents, including any financial statements or other documents,
including any schedules included therein, are referred to as the "CN Reports").
----------
Each such CN Report filed pursuant to the 1934 Act at the time filed (i) did not
contain any untrue statement of a material fact necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading and (ii) complied in all material respects with all other
requirements of applicable securities Laws. Each such CN Report filed pursuant
to the 1933 Act at the time declared effective (i) did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) complied in all material respects with all other requirements of applicable
securities Laws. CN has not filed any confidential material change report with
any Canadian Securities Regulator or any other securities authority or regulator
or any securities exchange or other self-regulatory authority that, as of the
date of this Agreement, remains confidential.
3.8 Financial Statements. The audited consolidated financial statements
--------------------
and unaudited consolidated interim financial statements of CN included in the CN
Reports fairly present, in conformity with Canadian GAAP or GAAP, as applicable,
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of CN and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of the unaudited consolidated interim financial statements).
3.9 No Material Adverse Changes. Except as contemplated by this
---------------------------
Agreement or as publicly disclosed prior to the date of this Agreement, since
December 31, 1998, CN and the CN Material Subsidiaries have conducted their
business in the ordinary course consistent with past practice and there has not
been (i) any event, occurrence or development of a state of circumstances or
facts that has had or reasonably could be expected to have a Material Adverse
Effect on CN (other than as a result of changes in conditions, including
economic or political developments, applicable to the railroad industry in
general or any changes in the economy or securities markets in general) or (ii)
any declaration, setting aside or payment of any dividend or other distribution
with respect to any shares of CN capital stock.
3.10 Undisclosed Material Liabilities. Except for (i) liabilities
--------------------------------
reflected in the CN Reports and (ii) liabilities incurred in the ordinary course
of business of CN and its Subsidiaries consistent with past practice subsequent
to December 31, 1998, CN and its Subsidiaries have no liabilities that would
reasonably be expected to have a Material Adverse Effect on CN and there
21
<PAGE>
is no existing condition or set of circumstances that would be reasonably likely
to result in such a liability; provided, however, that this representation does
-------- -------
not cover, and shall not be deemed to be breached as a result of, any such
liability that results primarily from a Customary Action.
3.11 Litigation. Except as set forth in the CN Reports, (i) there is no
----------
action, suit, investigation or proceeding (or any basis therefor) pending
against or, to the knowledge of CN, threatened against or affecting CN or any of
its Subsidiaries or any of their respective properties before any court or
arbitrator or any Governmental Entity where there is a reasonable probability of
a determination adverse to CN or any of its Subsidiaries that would be
reasonably likely to have a Material Adverse Effect on CN, and (ii) as of the
date of this Agreement, there is no such action, suit, investigation or
proceeding that in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Arrangement or any of the other transactions contemplated
by this Agreement.
3.12 Taxes. Except as set forth in the CN Reports or as would not
-----
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on CN, (i) all Tax Returns, statements, reports and forms
(collectively, the "CN Returns") required to be filed with any taxing authority
----------
or provided to any other Person as of the date of this Agreement by, or with
respect to, CN and its Subsidiaries have been filed or provided in accordance
with all applicable Laws; (ii) CN and its Subsidiaries have timely paid or
withheld all Taxes shown as due and payable on the CN Returns that have been so
filed or required to be withheld by CN or any of its Subsidiaries as of the date
of this Agreement and, as of the time of filing, the CN Returns were true,
complete and correct; (iii) CN and its Subsidiaries have made provision for all
Taxes payable by CN and its Subsidiaries for which no CN Return has yet been
filed or resulting from the final resolution of any controversy with any taxing
authority; (iv) the charges, accruals and reserves for Taxes with respect to CN
and its Subsidiaries reflected in the CN Reports are adequate under Canadian
GAAP or GAAP, as applicable, to cover the Tax liabilities accruing through the
date thereof; and (v) as of the date of this Agreement, there is no action,
suit, proceeding, investigation, audit or claim now proposed or pending against
or with respect to CN or any of its Subsidiaries in respect of any Tax where a
determination or decision against CN or any of its Subsidiaries is more probable
than not.
3.13 Employee Matters. (a) Except as contemplated by this Agreement,
----------------
Section 3.13 of the CN Disclosure Letter identifies (i) each "employee benefit
- ------------
plan," as defined in Section 3(3) of ERISA (other than multiemployer plans, as
defined in Section 3(37) of ERISA), and (ii) each employment, severance or other
similar contract, arrangement or policy and each retirement or deferred
compensation plan, stock plan, incentive compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance (including self-insured
arrangements) or hospitalization program, workers' compensation program,
disability program, supplemental unemployment program or fringe benefit
arrangement, whether maintained pursuant to contract or informal understanding,
that does not constitute an "employee benefit plan" (as defined in Section 3(3)
of ERISA), which, in the case of items described in both clauses
22
<PAGE>
(i) and (ii), is maintained, administered or contributed to by CN or any of its
ERISA Affiliates or with respect to which CN or any of its ERISA Affiliates has
any liability (collectively, the "CN U.S. Employee Plans"). Except as
----------------------
contemplated by this Agreement, Section 3.13 of the CN Disclosure Letter
------------
identifies each bonus, deferred compensation, incentive compensation, share
purchase, share appreciation, share option, severance and termination pay,
hospitalization, drug and other medical benefits, life and other insurance,
dental, disability, sick leave, salary continuation, vacation, supplemental
unemployment benefits, profit-sharing, mortgage assistance, pension, retirement
and supplemental retirement plans, programs and agreements sponsored,
maintained, contributed to or required to be contributed to by CN for the
benefit of any of the Canadian Employees, whether or not insured (collectively,
the "CN Canadian Employee Plans" and, together with the CN U.S. Employee Plans,
--------------------------
the "CN Employee Plans"). True and correct copies of each of the CN Employee
-----------------
Plans, all amendments thereto, any written interpretations thereof distributed
to employees, and all contracts relating thereto or the funding thereof,
including all trust agreements, insurance contracts, administration contracts,
investment management agreements, subscription and participation agreements,
recordkeeping agreements and summary plan descriptions, all as currently in
effect, have been furnished or made available to BNSF. CN has supplied or made
available to BNSF an accurate description of any CN Employee Plan that is not in
written form. To the extent applicable, true and correct copies of the three
most recent annual reports (Form 5500, including, if applicable, Schedule B
thereto) prepared in connection with any CN Employee Plan and the most recent
actuarial valuation report prepared in connection with any such plan have been
furnished or made available to BNSF.
(b) The only CN Employee Plans that are subject to Title IV of ERISA (the
"CN Pension Plans") are identified as such in Section 3.13 of the CN Disclosure
- ----------------- ------------
Letter. The only CN Canadian Employee Plans that are registered pension plans
(the "CN Canadian Pension Plans") are identified as such in Section 3.13 of the
------------------------- ------------
CN Disclosure Letter. No "accumulated funding deficiency," as defined in
Section 412 of the Code, has been incurred with respect to any CN Pension Plan,
whether or not waived. To CN's knowledge, no "reportable event," within the
meaning of Section 4043 of ERISA and the regulations promulgated thereunder has
occurred with respect to any CN Pension Plan, and no event described in Section
4041 (other than a standard termination), 4042, 4062 or 4063 of ERISA has
occurred in connection with any CN Pension Plan, other than a reportable event
for which the PBGC notice requirements have been waived or a reportable event
that would not be reasonably likely to have a Material Adverse Effect on CN. No
condition exists and no event has occurred that could constitute grounds for
termination of or the appointment of a trustee to administer any CN Pension Plan
under Section 4042 of ERISA and, to CN's knowledge, neither CN nor any of its
ERISA Affiliates has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction for which CN or any of its ERISA
Affiliates would have liability under Section 4069 or 4212(c) of ERISA. To CN's
knowledge, nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any CN Employee Plan has or will make CN
or any of its ERISA Affiliates or any officer or director of CN or any of its
ERISA Affiliates subject to any
23
<PAGE>
liability under Title I or Section 4071 of ERISA or liable for any Tax pursuant
to Section 4975 or Chapter 43, 47, 68 or 100 of the Code that would be
reasonably likely to have a Material Adverse Effect on CN.
(c) Each CN Employee Plan that is intended to be qualified under Section
401(a) of the Code is the subject of a favorable determination letter issued by
the IRS covering all changes in Law and changes to the form of the CN Employee
Plan for which the remedial amendment period (as described in regulations issued
under Section 401(b) of the Code) has not expired. Each CN Employee Plan has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all Laws, including ERISA and the Code, that
are applicable to such CN Employee Plan.
(d) None of the payments contemplated by the CN Employee Plans or any
other contract, plan or arrangement covering any employee or former employee of
CN or any of its ERISA Affiliates and arising solely as a result of the
transactions contemplated by this Agreement would, in the aggregate, constitute
excess parachute payments as defined in Section 280G of the Code (without regard
to subsection (b)(4) thereof) or provide for payments that exceed the
deductibility limitations of Section 162(m) of the Code.
(e) Except for obligations arising pursuant to any collective bargaining
agreements, to the knowledge of CN and its Subsidiaries, no condition exists
that would prevent CN or any of its Subsidiaries from amending or terminating
any CN Employee Plan providing health or medical benefits in respect of any
active or former employees of CN or any of its Subsidiaries.
(f) There has been no amendment or interpretation by CN or any of its
ERISA Affiliates relating to, or change in employee participation or coverage
under any CN Employee Plan that would increase materially the expense of
maintaining such CN Employee Plan above the level of expense incurred in respect
thereof for the fiscal year ended December 31, 1998.
(g) To the extent applicable, each CN Employee Plan that constitutes a
"group health plan" (as defined in Section 6071(1) of ERISA or Section
4980B(g)(2) of the Code), including any plans of current or former affiliates
that must be taken into account under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in substantial compliance with
applicable Law, including the group health plan continuation coverage
requirements of Section 4980B of the Code and Section 601 of ERISA and the
requirements of Chapter 100 of the Code.
(h) There are no actions, suits or claims (other than routine claims for
benefits) pending or, to CN's knowledge, threatened involving any CN Employee
Plan or the assets thereof, and no facts exist that could give rise to any such
actions, suits or claims (other than routine claims for benefits).
24
<PAGE>
(i) With respect to each employee pension benefit plan (as defined in
Section 3(2) of ERISA) that is a multiemployer plan with respect to which CN or
any of its ERISA Affiliates may have any liability (including any liability
attributable to a current or former member of CN's or any of its ERISA
Affiliates' "controlled group" (as defined in Section 4001(a)(14) of ERISA)),
(i) all contributions have been made as required by the terms of the plans, the
terms of any collective bargaining agreements and applicable Law, (ii) neither
CN nor any of its ERISA Affiliates has withdrawn, partially withdrawn or
received any notice of any claim or demand for withdrawal liability or partial
withdrawal liability that would be reasonably likely to have a Material Adverse
Effect on CN and (iii) neither CN nor any of its ERISA Affiliates has received
any notice that any such plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise Tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code or that any plan is or may become
insolvent.
(j) As of December 31, 1998, the Expected Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of postretirement health and medical benefits for current and former
employees of CN or any of its Subsidiaries calculated by CN's actuary using
reasonable actuarial assumptions was $65,000,000.
(k) Neither CN's board of directors nor any committee thereof has adopted
a resolution or taken any other action to determine or declare that any of the
transactions contemplated by this Agreement will constitute a change of control
for purposes of any CN Employee Plan.
(l) The transactions contemplated by this Agreement will not trigger any
obligation to fund the benefits under any CN Employee Plan.
3.14 Finders' Fees. Except for Salomon Smith Barney Inc.; The Beacon
-------------
Group Capital Services Group, LLC, and Nesbitt Burns Inc. copies of whose
engagement agreements have been provided to BNSF, there is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of CN or any of its Subsidiaries who might be entitled to any
fee or commission from BNSF or any of its affiliates in connection with the
transactions contemplated by this Agreement.
3.15 Environmental Matters. Except as set forth in the CN Reports or
---------------------
otherwise previously disclosed in writing by CN to BNSF, there are no
Environmental Liabilities of CN that, individually or in the aggregate, have had
or would be reasonably likely to have a Material Adverse Effect on CN.
3.16 Compliance with Laws. Except as publicly disclosed and except for
--------------------
any matter that would not be reasonably likely to have a Material Adverse Effect
on CN, neither CN nor any of its Subsidiaries is in violation of, or has
violated, any applicable provision of any Law.
25
<PAGE>
3.17 Year 2000 Compliance. CN and its Subsidiaries are Year 2000
--------------------
Compliant, and there are no foreseeable material expenses or other material
liabilities associated with the process of CN and its Subsidiaries becoming Year
2000 Compliant.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BNSF
--------------------------------------
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date of this Agreement, delivered by BNSF to CN
(the "BNSF Disclosure Letter"), BNSF represents and warrants to CN as follows:
----------------------
4.1 Corporate Existence and Power. BNSF is a corporation duly
-----------------------------
incorporated, validly existing and in good standing under the Laws of the State
of Delaware, and has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. BNSF is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect on BNSF. Prior to the date of this Agreement, BNSF has
made available to CN true and complete copies of its constitutive documents,
each as amended to date, and such constitutive documents are in full force and
effect.
4.2 Corporate Authorization. The execution, delivery and performance of
-----------------------
this Agreement and the Stock Option Agreements by BNSF and the consummation by
BNSF of the transactions contemplated hereby and thereby are within BNSF's
corporate powers and, except as set forth in the next sentence, have been duly
authorized by all necessary corporate action. The affirmative vote of the
holders of at least a majority of the outstanding BNSF Common Shares entitled to
vote on the approval and adoption of this Agreement is the only vote of any
class or series of BNSF capital stock necessary to consummate the Merger. This
Agreement has been duly executed and delivered by BNSF and constitutes its
legal, valid and binding obligation, enforceable against BNSF in accordance with
its terms, subject to bankruptcy, insolvency and other applicable Laws affecting
creditors' rights generally and general principles of equity.
4.3 Governmental Authorization. The execution, delivery and performance
--------------------------
by BNSF of this Agreement and the Stock Option Agreements and the consummation
by BNSF of the transactions contemplated hereby and thereby require no action by
or in respect of, or filing with, any Governmental Entity other than (i)
compliance with any applicable requirements of the HSR Act and the Competition
Act; (ii) compliance with any applicable requirements relating to approval of
the transactions contemplated by this Agreement by the STB; (iii) compliance
with
26
<PAGE>
any applicable requirements of the Securities Act, the 1933 Act and the 1934
Act; (iv) compliance with any applicable United States "blue sky" or Canadian
provincial securities Laws; and (v) immaterial actions or filings relating to
ordinary operational matters and filings with the United States Federal
Communications Commission with respect to radio licenses held by BNSF and its
Subsidiaries.
4.4 Non-Contravention. The execution, delivery and performance by BNSF of
-----------------
this Agreement and the Stock Option Agreements and the consummation by BNSF of
the transactions contemplated hereby and thereby do not and will not (except in
the case of clauses (ii), (iii) and (iv) of this Section 4.4, for any such
-----------
matters that individually or in the aggregate would not be reasonably likely to
have a Material Adverse Effect on BNSF) (i) contravene or conflict with its
constitutive documents; (ii) assuming compliance with the matters referred to in
Section 4.3, contravene or conflict with, or constitute a violation of, any
- -----------
provision of any Law binding upon or applicable to BNSF or any of its
Subsidiaries; (iii) constitute a default under, or give rise to a right of
termination, cancellation or acceleration of, any right or obligation of BNSF or
any of its Subsidiaries or to a loss of any benefit to which BNSF or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon BNSF or any of its Subsidiaries, or any license,
franchise, permit or other similar authorization held by BNSF or any of its
Subsidiaries; or (iv) result in the creation or imposition of any Lien on any
asset of BNSF or any of its Subsidiaries.
4.5 Capitalization. (a) The authorized capital stock of BNSF consists of
--------------
(i) six hundred million (600,000,000) BNSF Common Shares, (ii) twenty-five
million (25,000,000) shares of Preferred Stock, par value $0.01 per share ("BNSF
----
Preferred Stock") of which 6,900,000 shares were designated as 63% Cumulative
- ---------------
Convertible Preferred Stock, Series A, and 6,000,000 shares are being designated
Junior Participating Preferred Stock, Series B, in connection with the BNSF
Shareholder Rights Plan, and (iii) fifty million (50,000,000) shares of Class A
Preferred Stock, par value $0.01 per share ("BNSF Class A Preferred Stock"). As
----------------------------
of December 15, 1999, there were outstanding (i) 454,945,828 BNSF Common Shares
and 29,970,990 BNSF Common Shares were held in treasury, (ii) no shares of BNSF
Preferred Stock, (iii) no shares of BNSF Class A Preferred Stock, and (iv) BNSF
Options to purchase an aggregate of 30,048,057 BNSF Common Shares (of which,
BNSF Options to purchase an aggregate of 20,602,140 BNSF Common Shares were
exercisable). All outstanding shares of BNSF's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in this Section 4.5 or as contemplated by Section 7.1, and except for
----------- -----------
the exercise of BNSF Options outstanding on December 15, 1999, or issued since
that date in accordance with Section 7.1, there are outstanding (x) no shares of
-----------
capital stock or other voting securities of BNSF, (y) no securities of BNSF or
any of its Subsidiaries convertible into or exchangeable for shares of capital
stock or voting securities of BNSF and (z) no options or other rights to acquire
from BNSF or any of its Subsidiaries, and no obligation of BNSF or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of BNSF
(the items in clauses (x), (y) and (z)
27
<PAGE>
being referred to collectively as the "BNSF Securities"). There are no
---------------
outstanding obligations of BNSF or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any BNSF Securities, except for the transactions
contemplated by this Agreement.
(b) As of the date of this Agreement, there are no outstanding bonds,
debentures, notes or other indebtedness of BNSF having the right to vote (or
convertible into or exercisable for BNSF Securities having the right to vote) on
any matters upon which holders of BNSF Common Stock may vote (collectively, the
"BNSF Voting Debt").
----------------
4.6 Material Subsidiaries. Each of BNSF's Material Subsidiaries has been
---------------------
duly incorporated or formed under all applicable Laws, is validly existing and
in good standing under the Laws of its jurisdiction and has full corporate or
legal power and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted. Each of BNSF's
Material Subsidiaries is duly qualified to do business and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect on
BNSF. All of the outstanding shares and other ownership interests of BNSF's
Material Subsidiaries that are held directly or indirectly by BNSF are validly
issued, fully paid and nonassessable; all such shares and other ownership
interests are owned directly or indirectly by BNSF, free and clear of all
material Liens and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Other than those obligations identified in
Section 4.6 of the BNSF Disclosure Letter, there are no outstanding (i)
- -----------
securities of BNSF or any of its Subsidiaries convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any Subsidiary of BNSF or (ii) options or other rights to acquire from BNSF or
any of its Subsidiaries, and no other obligation of BNSF or any of its
Subsidiaries to issue, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any capital
stock voting securities or ownership interests in, any Subsidiary of BNSF (the
capital stock of each Subsidiary of BNSF, together with the items in clauses (i)
and (ii), being referred to collectively as the "BNSF Subsidiary Securities").
--------------------------
There are no outstanding obligations of BNSF or any Subsidiary of BNSF to
repurchase, redeem or otherwise acquire any outstanding BNSF Subsidiary
Securities.
4.7 SEC Filings. BNSF has filed with the SEC true and complete copies of
-----------
all forms, reports, schedules, statements and other documents required to be
filed by it since January 1, 1997 (such forms, reports, schedules, statements
and other documents, including any financial statements or other documents,
including any schedules included therein, are referred to as the "BNSF
----
Reports"). Each such BNSF Report filed pursuant to the 1934 Act at the time
filed (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading and (ii) complied in all material respects
28
<PAGE>
with all other requirements of applicable securities Laws. Each such BNSF Report
filed pursuant to the 1933 Act at the time declared effective (i) did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) complied in all material respects with all other
requirements of applicable securities Laws. BNSF has not filed any confidential
report with the SEC or any other securities authority or regulator or any
securities exchange or other self-regulatory authority that, as of the date of
this Agreement, remains confidential.
4.8 Financial Statements. The audited consolidated financial statements
--------------------
and unaudited consolidated interim financial statements of BNSF included in the
BNSF Reports fairly present, in conformity with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of BNSF and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited consolidated interim financial statements).
4.9 No Material Adverse Changes. Except as contemplated by this
---------------------------
Agreement or as publicly disclosed prior to the date of this Agreement, since
December 31, 1998, BNSF and the BNSF Material Subsidiaries have conducted their
business in the ordinary course consistent with past practice and there has not
been (i) any event, occurrence or development of a state of circumstances or
facts that has had or reasonably could be expected to have a Material Adverse
Effect on BNSF (other than as a result of changes in conditions, including
economic or political developments, applicable to the railroad industry
generally or any changes in the economy or securities markets in general) or
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of BNSF capital stock.
4.10 Undisclosed Material Liabilities. Except for (i) liabilities
--------------------------------
reflected in the BNSF Reports and (ii) liabilities incurred in the ordinary
course of business of BNSF and its Subsidiaries consistent with past practice
subsequent to December 31, 1998, BNSF and its Subsidiaries have no liabilities
that would reasonably be expected to have a Material Adverse Effect on BNSF and
there is no existing condition or set of circumstances that would be reasonably
likely to result in such a liability; provided, however, that this
-------- -------
representation does not cover, and shall not be deemed to be breached as a
result of, any such liability that results primarily from a Customary Action.
4.11 Litigation. Except as set forth in the BNSF Reports, (i) there is no
----------
action, suit, investigation or proceeding (or any basis therefor) pending
against or, to the knowledge of BNSF, threatened against or affecting BNSF or
any of its Subsidiaries or any of their respective properties before any court
or arbitrator or any Governmental Entity where there is a reasonable probability
of a determination adverse to BNSF or any of its Subsidiaries that would be
reasonably likely to have a Material Adverse Effect on BNSF, and (ii) as of the
date of this Agreement, there is no such action, suit, investigation or
proceeding that in any manner
29
<PAGE>
challenges or seeks to prevent, enjoin, alter or materially delay the
Arrangement or any of the other transactions contemplated by this Agreement.
4.12 Taxes. Except as set forth in the BNSF Reports or as would not
-----
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on BNSF, (i) all Tax Returns, statements, reports and forms
(collectively, the "BNSF Returns") required to be filed with any taxing
-------------
authority or provided to any other Person as of the date of this Agreement by,
or with respect to, BNSF and its Subsidiaries have been filed or provided in
accordance with all applicable Laws; (ii) BNSF and its Subsidiaries have timely
paid or withheld all Taxes shown as due and payable on the BNSF Returns that
have been so filed or required to be withheld by BNSF or any of its Subsidiaries
as of the date of this Agreement and, as of the time of filing, the BNSF Returns
were true, complete and correct; (iii) BNSF and its Subsidiaries have made
provision for all Taxes payable by BNSF and its Subsidiaries for which no BNSF
Return has yet been filed or resulting from the final resolution of any
controversy with any taxing authority; (iv) the charges, accruals and reserves
for Taxes with respect to BNSF and its Subsidiaries reflected in the BNSF
Reports are adequate under GAAP to cover the Tax liabilities accruing through
the date thereof; and (v) as of the date of this Agreement, there is no action,
suit, proceeding, investigation, audit or claim now proposed or pending against
or with respect to BNSF or any of its Subsidiaries in respect of any Tax where a
determination or decision against BNSF or any of its Subsidiaries is more
probable than not.
4.13 Employee Matters. (a) Except as contemplated by this Agreement,
----------------
Section 4.13 of the BNSF Disclosure Letter identifies (i) each "employee benefit
- ------------
plan," as defined in Section 3(3) of ERISA (other than multiemployer plans, as
defined in Section 3(37) of ERISA), and (ii) each employment, severance or other
similar contract, arrangement or policy and each retirement or deferred
compensation plan, stock plan, incentive compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance (including self-insured
arrangements) or hospitalization program, workers' compensation program,
disability program, supplemental unemployment program or fringe benefit
arrangement, whether maintained pursuant to contract or informal understanding,
that does not constitute an "employee benefit plan" (as defined in Section 3(3)
of ERISA), which, in the case of items described in both clauses (i) and (ii),
is maintained, administered or contributed to by BNSF or any of its ERISA
Affiliates or with respect to which BNSF or any of its ERISA Affiliates has any
liability (collectively, the "BNSF Employee Plans"). True and correct copies of
-------------------
each of the BNSF Employee Plans, all amendments thereto, any written
interpretations thereof distributed to employees, and all contracts relating
thereto or the funding thereof, including all trust agreements, insurance
contracts, administration contracts, investment management agreements,
subscription and participation agreements, recordkeeping agreements and summary
plan descriptions, all as currently in effect, have been furnished or made
available to CN, or were available upon request from BNSF. Any BNSF Employee
Plan that was not provided to CN (as designated in Section 4.13 of the BNSF
------------
Disclosure Letter by an asterisk) is not material (using the definition of
"material" set forth in Section 1.1). BNSF has supplied or made available to CN
-----------
an accurate
30
<PAGE>
description of any BNSF Employee Plan that is not in written form. To the extent
applicable, true and correct copies of the three most recent annual reports
(Form 5500, including, if applicable, Schedule B thereto) prepared in connection
with any BNSF Employee Plan and the most recent actuarial valuation report
prepared in connection with any such plan have been furnished or made available
to CN.
(b) The only BNSF Employee Plans that are subject to Title IV of ERISA
(the "BNSF Pension Plans") are identified as such in Section 4.13 of the BNSF
------------------ ------------
Disclosure Letter. No "accumulated funding deficiency," as defined in Section
412 of the Code, has been incurred with respect to any BNSF Pension Plan,
whether or not waived. To BNSF's knowledge, no "reportable event," within the
meaning of Section 4043 of ERISA and the regulations promulgated thereunder has
occurred with respect to any BNSF Pension Plan, and no event described in
Section 4041 (other than a standard termination), 4042, 4062 or 4063 of ERISA
has occurred in connection with any BNSF Pension Plan, other than a reportable
event for which the PBGC notice requirements have been waived or a reportable
event that would not be reasonably likely to have a Material Adverse Effect on
BNSF. No condition exists and no event has occurred that could constitute
grounds for termination of or the appointment of a trustee to administer any
BNSF Pension Plan under Section 4042 of ERISA and, to BNSF's knowledge, neither
BNSF nor any of its ERISA Affiliates has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction for which BNSF or
any of its ERISA Affiliates would have liability under Section 4069 or 4212(c)
of ERISA. To BNSF's knowledge, nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with any BNSF
Employee Plan has or will make BNSF or any of its ERISA Affiliates or any
officer or director of BNSF or any of its ERISA Affiliates subject to any
liability under Title I or Section 4071 of ERISA or liable for any Tax pursuant
to Section 4975 or Chapter 43, 47 or 68 of the Code that would be reasonably
likely to have a Material Adverse Effect on BNSF.
(c) Each BNSF Employee Plan that is intended to be qualified under Section
401(a) of the Code is the subject of a favorable determination letter issued by
the IRS covering all changes in Law and changes to the form of the BNSF Employee
Plan for which the remedial amendment period (as described in regulations issued
under Section 401(b) of the Code) has not expired. Each BNSF Employee Plan has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all Laws, including ERISA and the Code, that
are applicable to such BNSF Employee Plan.
(d) None of the payments contemplated by the BNSF Employee Plans or any
other contract, plan or arrangement covering any employee or former employee of
BNSF or any of its ERISA Affiliates and arising solely as a result of the
transactions contemplated by this Agreement would, in the aggregate, constitute
excess parachute payments as defined in Section 280G of the Code (without regard
to subsection (b)(4) thereof) or provide for payments that exceed the
deductibility limitations of Section 162(m) of the Code.
31
<PAGE>
(e) Except for obligations arising pursuant to any collective bargaining
agreements, to the knowledge of BNSF and its Subsidiaries, no condition exists
that would prevent BNSF or any of its Subsidiaries from amending or terminating
any BNSF Employee Plan providing health or medical benefits in respect of any
active or former employees of BNSF or any of its Subsidiaries.
(f) There has been no amendment or interpretation by BNSF or any of its
ERISA Affiliates relating to, or change in employee participation or coverage
under any BNSF Employee Plan that would increase materially the expense of
maintaining such BNSF Employee Plan above the level of expense incurred in
respect thereof for the fiscal year ended December 31, 1998.
(g) To the extent applicable, each BNSF Employee Plan that constitutes a
"group health plan" (as defined in Section 6071(1) of ERISA or Section
4980B(g)(2) of the Code), including any plans of current or former affiliates
that must be taken into account under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in substantial compliance with
applicable Law, including the group health plan continuation coverage
requirements of Section 4980B of the Code and Section 601 of ERISA and the
requirements of Chapter 100 of the Code.
(h) There are no actions, suits or claims (other than routine claims for
benefits) pending or, to BNSF's knowledge, threatened involving any BNSF
Employee Plan or the assets thereof, and no facts exist that could give rise to
any such actions, suits or claims (other than routine claims for benefits).
(i) With respect to each employee pension benefit plan (as defined in
Section 3(2) of ERISA) that is a multiemployer plan with respect to which BNSF
or any of its ERISA Affiliates may have any liability (including any liability
attributable to a current or former member of BNSF's or any of its ERISA
Affiliates' "controlled group" (as defined in Section 4001(a)(14) of ERISA)),
(i) all contributions have been made as required by the terms of the plans, the
terms of any collective bargaining agreements and applicable Law, (ii) neither
BNSF nor any of its ERISA Affiliates has withdrawn, partially withdrawn or
received any notice of any claim or demand for withdrawal liability or partial
withdrawal liability that would be reasonably likely to have a Material Adverse
Effect on BNSF and (iii) neither BNSF nor any of its ERISA Affiliates has
received any notice that any such plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise Tax, that any such plan is or has been funded at a rate
less than that required under Section 412 of the Code or that any plan is or may
become insolvent.
(j) As of December 31, 1998, the Expected Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of postretirement health and medical benefits for current and former
employees of BNSF or any of its Subsidiaries
32
<PAGE>
calculated by BNSF's actuary using reasonable actuarial assumptions was
approximately $232,000,000.
(k) Neither BNSF's board of directors nor any committee thereof has
adopted a resolution or taken any other action to declare or determine that any
of the transactions contemplated by this Agreement will constitute a change in
control for the purposes of any BNSF Employee Plan.
(l) The transactions contemplated by this Agreement will not trigger any
obligation to fund the benefits under any BNSF Employee Plan.
4.14 Finders' Fees. Except for Goldman, Sachs & Co., a copy of whose
-------------
engagement has been provided to CN, there is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to act
on behalf of BNSF or any of its Subsidiaries who might be entitled to any fee or
commission from BNSF or any of its affiliates in connection with the
transactions contemplated by this Agreement.
4.15 Environmental Matters. Except as set forth in the BNSF Reports or
---------------------
otherwise previously disclosed in writing by BNSF to CN, there are no
Environmental Liabilities of BNSF that, individually or in the aggregate, have
had or would be reasonably likely to have a Material Adverse Effect on BNSF.
4.16 Takeover Statutes; Rights Plan. (a) BNSF's board of directors has
------------------------------
taken all necessary action to make Section 203 of the DGCL inapplicable to this
Agreement and the BNSF Stock Option Agreement and the transactions contemplated
hereby and thereby.
(b) BNSF's board of directors has taken all necessary action to render
the rights issued pursuant to the terms of the BNSF Shareholder Rights Plan
inapplicable to the Merger, this Agreement and the transactions contemplated
hereby and thereby.
4.17 Compliance with Laws. Except as publicly disclosed and except for
--------------------
any matter that would not be reasonably likely to have a Material Adverse Effect
on BNSF, neither BNSF nor any of its Subsidiaries is in violation of, or has
violated, any applicable provision of any Law.
4.18 Year 2000 Compliance. BNSF and its Subsidiaries are Year 2000
--------------------
Compliant, and there are no foreseeable material expenses or other material
liabilities associated with the process of BNSF and its Subsidiaries becoming
Year 2000 Compliant.
33
<PAGE>
ARTICLE V
COVENANTS OF EACH PARTY
-----------------------
5.1 Reasonable Best Efforts. Subject to the terms and conditions of this
-----------------------
Agreement, each party shall use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate the transactions
contemplated by this Agreement.
5.2 Regulatory Approvals. Each party shall, and shall cause each of its
--------------------
Subsidiaries to:
(i)(A) cooperate with one another to prepare and present to the
STB as soon as practicable after the date of this Agreement all filings and
other presentations in connection with seeking any STB approval, exemption
or other authorization necessary to consummate the transactions
contemplated by this Agreement (including the matters contemplated by
Section 5.4); (B) prosecute such filings and other presentations with
-----------
diligence; (C) diligently oppose any objections to, appeals from or
petitions to reconsider or reopen any such STB approval by Persons not
party to this Agreement; and (D) take all such further action as reasonably
may be necessary to obtain a final order of the STB approving the
transactions contemplated by this Agreement consistent with the terms and
conditions set forth in this Agreement; provided, however, that (without
-------- -------
limiting the parties' rights under Article VIII or Article IX) the
------------ ----------
Implementation Committee shall have final authority over the development,
presentation and conduct of the STB case, including discussions with third
parties.
(ii)(A) cooperate with one another to prepare and file as soon as
practicable after the date of this Agreement all notices and information
required under Part IX of the Competition Act (Canada), if any, and any
additional information requested by the Canadian Competition Bureau
thereunder; (B) cooperate with one another to prepare and file as soon as
practicable after the date of this Agreement with the Commissioner of
Competition appointed under the Competition Act (the "Commissioner") a
------------
competitive impact statement in connection with the transactions
contemplated by this Agreement; and (C) use reasonable best efforts to
obtain from the Commissioner assurances that the Commissioner shall not
take any action to enforce any relevant provision of the Competition Act in
respect of any transactions contemplated by this Agreement.
(iii)(A) cooperate with one another to prepare an application for
the Interim Order and the Final Order as soon as practicable after the date
of this Agreement; (B) prosecute such applications with diligence; (C)
diligently oppose any objections to, and diligently pursue any appeals
from, such applications; and (D) take all such further action as reasonably
may be necessary to obtain the Interim Order and Final Order approving the
Arrangement consistent with the terms and conditions set forth in this
Agreement.
34
<PAGE>
5.3 Certain Filings; Securities Compliance. (a) Each party shall
--------------------------------------
cooperate in the preparation of any application for the orders and the
preparation of any required registration statements and any other documents
reasonably deemed by BNSF or CN to be necessary to discharge their respective
obligations under United States and Canadian federal, provincial, territorial or
state securities Laws in connection with the Arrangement and the other
transactions contemplated by this Agreement; provided, however, that, with
-------- -------
respect to the United States "blue sky" and Canadian provincial qualifications,
neither BNSF nor CN shall be required to register or qualify as a foreign
corporation or to take any action that would subject it to service of process in
any jurisdiction where such entity is not now so subject.
(b) As promptly as practicable after the date of this Agreement, the
parties shall (i) jointly prepare and file with the SEC one or more
registration statements on Form S-4 (or other applicable form) (the "Form S-4")
--------
(in which the BNSF proxy statement shall be included as a prospectus) and Form
F-4 (or other applicable form) (the "Form F-4"); (ii) use reasonable best
--------
efforts to have the Form S-4 and Form F-4 declared effective by the SEC and,
thereafter, mail to stockholders of BNSF as promptly as practicable the BNSF
proxy statement included in the Form S-4 and all other proxy materials for the
BNSF Stockholder Meeting; and (iii) otherwise comply with all legal requirements
applicable to the BNSF Stockholder Meeting and the issuance of securities
contemplated by this Agreement.
(c) As promptly as practicable after the date of this Agreement, the
parties shall (i) jointly prepare the Circular; (ii) use reasonable best efforts
to cause the Circular and other documentation required in connection with the CN
Stockholder Meeting to be mailed to stockholders of CN and filed as required by
the Interim Order and applicable Laws; and (iii) otherwise comply with all legal
requirements applicable to the CN Stockholder Meeting and the issuance of
securities contemplated by this Agreement.
(d) Newco and CN shall jointly prepare and file a registration statement
on Form S-3 (and/or other applicable forms, including a registration statement
on Form F-3) (the "Form S-3") in order to register under the 1933 Act the Newco
--------
Stapled Units to be issued from time to time after the Closing upon exchange of
the CN Exchangeable Shares and shall use reasonable best efforts to cause the
Form S-3 to become effective and to maintain the effectiveness of such
registration for the period that such CN Exchangeable Shares remain outstanding.
(e) Newco and CN shall jointly prepare and file a registration statement
on Form S-8 (and/or other applicable forms) ( the "Form S-8") in order to
--------
register under the 1933 Act those Newco Stapled Units to be issued from time to
time after the Closing upon the exercise of the CN Replacement Options or Newco
Replacement Options, and shall use reasonable commercial efforts to cause the
Form S-8 to become effective at or prior to the Arrangement Effective Time and
to maintain the effectiveness of such registration for the period of time that
the CN Replacement Options and Newco Replacement Options remain outstanding and
may be exercised.
35
<PAGE>
(f) Each party shall furnish to the other party all such information
concerning it and its stockholders as may be required (and, in the case of its
stockholders, available to it) for the effectuation of the actions described in
this Section 5.3. Each covenants that no such information furnished by it (to
-----------
its knowledge in the case of information concerning its stockholders) (i) for
inclusion in the BNSF or CN proxy statements or any other filing under the 1934
Act or filed with Canadian Securities Regulators prepared in connection with
transactions contemplated by this Agreement shall contain any untrue statement
of a material fact or omit to state a material fact required to be stated in any
such document or necessary in order to make any information so furnished for use
in any such document not misleading in light of the circumstances in which it is
furnished and (ii) for inclusion in any registration statement or other filing
under the 1933 Act or filed with Canadian Securities Regulators prepared in
connection with the transactions contemplated by this Agreement shall contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in any such document or necessary in order to make any
information so furnished for use in any such document not misleading. Each
party shall promptly notify the other if at any time before or after the Closing
it becomes aware that any such information contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in the case of such 1934 Act
filings, not misleading in light of the circumstances in which they are made
and, in the case of such 1933 Act filings, not misleading.
(g) Within two business days after the date of this Agreement, CN shall
prepare and file with The Toronto Stock Exchange a notice of the option granted
by CN to BNSF under the CN Stock Option Agreement and the proposed issuance of
CN Common Shares issuable upon the exercise of such option and shall use
reasonable best efforts to cause The Toronto Stock Exchange to accept such
notice, without conditions, as soon as practicable.
5.4 Access to Information. (a) Subject to any confidentiality agreements
---------------------
or other confidentiality obligations binding upon any party or any of such
party's Subsidiaries, from the date of this Agreement until the Arrangement
Effective Time and except as prohibited by applicable Law, each party shall give
the other party, its counsel, financial advisors, auditors and other authorized
representatives full, reasonable access to the offices, properties, books and
records of such party and its Subsidiaries, shall furnish to the other party,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such Persons may
reasonably request and shall instruct such party's employees, counsel and
financial advisors to cooperate with the other party in its investigation of the
business of such party and its Subsidiaries; provided, however, that no
-------- -------
investigation pursuant to this Section 5.4 shall affect any representation or
-----------
warranty given by the parties under this Agreement; and provided further, that
----------------
access to certain information may require the entry of a protective order by the
STB, after which date access shall be granted to such information consistent
with this Section 5.4 and subject to the terms of such order.
-----------
36
<PAGE>
(b) The parties acknowledge that certain information may be competitively
sensitive ("Highly Confidential Information"). The parties agree that, prior to
-------------------------------
any disclosure of any such Highly Confidential Information, appropriate
arrangements shall be made to ensure compliance with all requirements of
applicable Law.
5.5 Notices of Certain Events. Each party shall promptly notify the other
-------------------------
party to this Agreement of:
(i) any notice or other communication such party receives from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication such party receives from any
Governmental Entity in connection with the transactions contemplated by
this Agreement, including the Arrangement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of such party's knowledge, threatened against,
relating to or involving or otherwise affecting such party or any
Subsidiary of such party that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 3.11 or
------------
Section 4.11, as the case may be, that relate to the consummation of the
------------
transactions contemplated by this Agreement.
5.6 Stock Exchange Listing. Each party shall use its reasonable best
----------------------
efforts to have the Newco Common Shares and CN Voting Shares constituting the
Newco Stapled Units approved for listing on all securities exchanges on which
BNSF Common Shares were listed immediately prior to the Merger Effective Time
and to have the CN Exchangeable Shares and CN Voting Shares constituting the CN
Stapled Units approved for listing on The Toronto Stock Exchange.
5.7 Public Announcements. The initial press release with respect to the
--------------------
transactions contemplated by this Agreement shall be a joint press release.
Thereafter, the parties shall consult with each other before issuing any press
release with respect to this Agreement and the transactions contemplated by this
Agreement and, except as may be required by applicable Law or the requirements
of any securities exchange on which a party's securities are traded, will not
issue any such press release prior to such consultation.
5.8 Further Assurances. At and after the Arrangement Effective Time, the
------------------
officers and directors of each party shall be authorized to execute and deliver,
in the name and on behalf of such party, any deeds, bills of sale, assignments
or assurances and to take and do, in the name and on behalf of such party, any
other actions and things necessary or desirable with respect to the consummation
of the transactions contemplated by this Agreement.
37
<PAGE>
5.9 Cooperation. Without limiting any party's obligation under any other
-----------
provision of this Agreement, each party shall together, or pursuant to an
allocation of responsibility to be agreed among the parties, coordinate and
cooperate (i) with respect to the timing of the BNSF Stockholder Meeting and the
CN Stockholder Meeting and shall use reasonable best efforts to hold such
meetings on the same day; (ii) in connection with the preparation of the
Circular, the Form S-4, the Form F-4, the Form S-3 and the Form S-8; (iii) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts in connection
with the consummation of the transactions contemplated by this Agreement; (iv)
in seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Circular, the Form S-4, the Form F-4, the Form S-3 and the Form S-8 and timely
seeking to obtain any such actions, consents, approvals or waivers; (v) to cause
the Merger to qualify as a "reorganization" within the meaning of Section 368(a)
of the Code or to comply with the requirements of Section 351(a) of the Code;
and (vi) to cause the exchange of CN Exchangeable Shares for Newco Common Shares
pursuant to the Arrangement to comply with the requirements of Section 351(a) of
the Code. Subject to the terms and conditions of this Agreement, the parties
shall, subject to applicable Law, confer on a regular and frequent basis with
one or more representatives of one another to report operational matters of
significance to the transactions contemplated by this Agreement and the general
status of ongoing operations insofar as relevant to the transactions
contemplated by this Agreement; provided, however, that the parties shall not
-------- -------
confer on any matter to the extent inconsistent with applicable Law.
5.10 Closing Matters. Each party shall deliver at the Closing such
---------------
customary certificates, resolutions and other closing documents as may be
reasonably required by the other parties to this Agreement.
5.11 Obligations of Newco. Each of CN and BNSF will take all actions
--------------------
necessary to cause Newco to perform its obligations under this Agreement.
Without limiting the generality of the foregoing, CN, BNSF and Newco agree that:
(a) immediately prior to the Merger Effective Time, Newco shall be a
corporation duly incorporated, validly existing and in good standing under the
Laws of Delaware and shall have all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on the businesses of BNSF as such businesses are now conducted;
(b) at the Merger Effective Time, the performance by Newco of this
Agreement and the consummation by Newco of the transactions contemplated by this
Agreement shall be within the corporate powers of Newco and shall have been duly
authorized by all necessary corporate action on the part of Newco;
38
<PAGE>
(c) at the Merger Effective Time, the performance by Newco of this
Agreement and the consummation by Newco of the transactions contemplated by this
Agreement shall require no action by or in respect of, or filing with, any
Governmental Entity other than (i) compliance with any applicable requirements
of the Competition Act; (ii) compliance with any applicable requirements
relating to approval of the transactions contemplated by this Agreement by the
STB; (iii) compliance with any applicable requirements of the 1933 Act and the
1934 Act; (iv) compliance with any applicable United States "blue sky" or
Canadian provincial securities Laws; and (v) immaterial actions or filings
relating to ordinary operational matters;
(d) at the Merger Effective Time, the performance by Newco of this
Agreement and the consummation by Newco of the transactions contemplated by this
Agreement will not (except in the case of clauses (ii), (iii) and (iv) of this
subsection (d), for any such matters that individually or in the aggregate would
not be reasonably likely to have a Material Adverse Effect on Newco) (i)
contravene or conflict with the certificate of incorporation or by-laws of
Newco, (ii) assuming compliance with the matters set forth in subsection (c)
above, contravene or conflict with or constitute a violation of any provisions
of any Law binding upon or applicable to Newco, (iii) constitute a default under
or give rise to any right of termination, cancellation or acceleration of any
right or obligation of Newco or any of its Subsidiaries or to a loss of any
benefit to which Newco or any of its Subsidiaries is entitled under any
agreement, contract or other instrument binding upon Newco or any of its
Subsidiaries or any license, franchise, permit or other similar authorization
held by Newco or any of its Subsidiaries or (iv) result in the creation of or
imposition of any material Lien on any asset of Newco or any Subsidiary of
Newco;
(e) at the Merger Effective Time, Newco shall issue the Newco Common
Stock and the Newco Replacement Options in accordance with Section 2.3, and such
-----------
securities shall be duly authorized, validly issued and fully paid and
nonassessable;
(f) from and after the Merger Effective Time, Newco shall, or shall cause
BNSF to, perform the obligations of BNSF under each agreement between BNSF and
any employee of BNSF providing for protections or benefits to such employee in
the event of a change of control, and Newco and CN together shall ensure that
the obligations of CN under each agreement between CN and any employee of CN
providing for protections or benefits to such employee in the event comparable
circumstances are satisfied; and
(g) from the date hereof until the Arrangement Effective Time, Newco
shall not engage in any activities other than in connection with or as
contemplated by this Agreement.
5.12 Implementation Committee. Immediately after the date of this
------------------------
Agreement, BNSF and CN will establish a committee (the "Implementation
--------------
Committee") consisting of three representatives of BNSF and two representatives
- ---------
of CN. The initial BNSF representatives shall be Robert D. Krebs, Thomas N. Hund
and Matthew K. Rose and the initial CN representatives
39
<PAGE>
shall be Paul M. Tellier and E. Hunter Harrison. The successor to any
representative on the Implementation Committee shall be designated by the party
that designated such representative. Without in any way limiting their rights
under Article VIII or Article IX, BNSF and CN agree that the Implementation
------------ ----------
Committee shall be responsible, on behalf of both parties, for directing the
preparation and presentation to the STB of all filings and other presentations
in connection with seeking any STB approval, exemption or other authorization
necessary to consummate the transactions contemplated by this Agreement, the
prosecution of such filings and other presentation and negotiation (with the STB
or any third party) of any matters in connection with seeking such approval. In
addition to the foregoing, to the extent permitted by applicable Law, the
Implementation Committee shall work actively to develop plans for the
integration of the operations of CN and BNSF after the Arrangement Effective
Time. BNSF and CN agree that the principal objectives of the Implementation
Committee are to ensure that the STB approval of the transactions contemplated
by this Agreement is obtained as expeditiously and on terms as favorable to
Newco, BNSF, CN and their respective Subsidiaries as is reasonably possible, and
to develop plans for the integration of the operations of BNSF and CN that will
permit the most expeditious and favorable integration of such operations as is
reasonably possible. The Implementation Committee shall act by consensus and not
by majority vote of its members. The composition of the Implementation Committee
reflects the nature of the issues to be addressed by the Implementation
Committee with respect to CN and BNSF, and the fact that the STB process will
relate to issues in the United States rather than to the relative influence of
CN and BNSF on the Implementation Committee.
5.13 Interline Coordinations. As soon as practicable after the date of
-----------------------
this Agreement, BNSF and CN shall, to the extent consistent with applicable Law,
work in good faith to develop and implement a range of mutually beneficial
interline coordinations. Without limiting the generality of the foregoing, it is
currently contemplated that such interline coordinations will include, among
other things, to the extent consistent with applicable Law, matters relating to
information technology (intended to develop a common information technology
platform), procurement and marketing.
5.14 Dividends. CN and BNSF shall coordinate the declaration, setting of
---------
record dates and payment dates of dividends on CN and BNSF common stock so that
(i) holders of CN common stock do not receive dividends on both CN Common
Shares, on the one hand, and Newco Common Shares or CN Exchangeable Shares
received in the Arrangement, on the other hand, in respect of any calendar
quarter or fail to receive a dividend on either CN Common Shares, on the one
hand, or Newco Common Shares or CN Exchangeable Shares received in the
Arrangement, on the other hand, in respect of any calendar quarter and (ii)
holders of BNSF common stock do not receive dividends on both BNSF Common
Shares, on the one hand, and Newco Common Shares received in the Merger, on the
other hand, in respect of any calendar quarter or fail to receive a dividend on
either BNSF Common Shares, on the one hand, or Newco Common Shares received in
the Merger, on the other hand, in respect of any calendar quarter.
40
<PAGE>
5.15 Shareholder Rights Plans and Similar Matters. BNSF shall not reduce
--------------------------------------------
or cause to be reduced the percentage threshold in the definition of "Acquiring
Person" set forth in the BNSF Shareholder Rights Plan or take any other action
that would impact the ability of CN to exercise the option granted to CN under
the BNSF Stock Option Agreement or CN's ability to own, vote and exercise all
rights of ownership of the BNSF Common Shares purchased by CN upon exercise of
the option granted to CN under the BNSF Stock Option Agreement. CN shall not
adopt or cause to be adopted a shareholder rights plan or similar arrangement
that would impact the ability of BNSF to exercise the option granted to BNSF
under the CN Stock Option Agreement or BNSF's ability to own, vote and exercise
all rights of ownership of the CN Common Shares purchased by BNSF upon exercise
of the option granted to BNSF under the CN Stock Option Agreement.
ARTICLE VI
COVENANTS OF CN
---------------
6.1 Conduct of CN. From the date of this Agreement until the Arrangement
-------------
Effective Time, except as provided in Section 6.1 of the CN Disclosure Letter,
-----------
CN and CN's Subsidiaries shall conduct their business in the ordinary course of
business consistent with past practice and shall use their reasonable best
efforts to preserve intact their business organizations and relationships with
third parties; provided, however, that nothing in this Section 6.1 shall be
-------- ------- -----------
deemed to prevent CN and its Subsidiaries from taking any action referred to in
clauses (b)(ii), (c), (f) or (g) of this Section 6.1 where the taking of such
-----------
action is not consistent with the past practices of CN and its Subsidiaries if,
but only if, such action is a Customary Action. Notwithstanding anything to the
contrary in this Agreement, CN shall be permitted to repurchase CN Common Shares
from time to time prior to the Closing in open market purchases, at the
prevailing market price; provided, however, that such repurchases shall not, in
-------- -------
the aggregate, have the effect of decreasing the number of issued and
outstanding CN Common Shares by more than 8.0% during any calendar year, as
compared to the number of issued and outstanding CN Common Shares at the
beginning of such calendar year. Without limiting the generality of the
foregoing, from the date of this Agreement until the Closing, without the
written consent of BNSF, which shall not be unreasonably withheld:
(a) Except for the Arrangement, CN shall not adopt or propose any
change in its constitutive documents;
(b) Except for the Arrangement and the other transactions
contemplated by this Agreement, CN shall not, and shall not permit any CN
Subsidiary, to (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization or (ii) make any acquisition of any business or other
assets, whether by means of merger, consolidation or otherwise, other than
in the ordinary course of business consistent with past practices and other
than acquisitions that are Customary Actions; provided, however, that any
-------- -------
wholly owned subsidiary of CN may
41
<PAGE>
merge or consolidate with CN or any other wholly owned subsidiary of CN and
any wholly owned subsidiary of CN that is not a Material Subsidiary may be
liquidated or dissolved;
(c) CN shall not, and shall not permit any CN Subsidiary to, sell,
lease, license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments, (ii) in the
ordinary course of business consistent with past practice and (iii) any
such sale, lease, license or other disposition that is a Customary Action
or that is to any wholly owned Subsidiary of CN;
(d) CN shall not, and shall not permit any of its Subsidiaries to,
declare, set aside or pay any dividend or make any other distribution with
respect to any shares of CN capital stock other than cash dividends on CN
Common Shares not in excess of Canadian $0.70 per share, per year;
(e) Except (i) as expressly permitted by Article II or Section
---------- -------
6.1(h), (ii) pursuant to existing contracts or commitments or (iii)
pursuant to CN Options and other awards outstanding on the date of this
Agreement, CN shall not, and shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any CN Securities, any CN Voting Debt, any securities or ownership
interests in any Material Subsidiary of CN or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire,
any CN Securities, CN Voting Debt or securities or ownership interests in
any Material Subsidiary of CN;
(f) Except for (i) borrowings under existing credit facilities,
replacements therefor and refinancings thereof, (ii) borrowings in the
ordinary course of business consistent with past practice or (iii)
borrowings that are Customary Actions, CN shall not, and shall not permit
any of its Subsidiaries to, incur any indebtedness for borrowed money or
guarantee any such indebtedness;
(g) Except for loans, advances, capital contributions or investments
made in the ordinary course of business consistent with past practice and
except for loans, advances, capital contributions or investments that are
Customary Actions, CN shall not, and shall not permit any of its
Subsidiaries to, make any loans, advances or capital contributions to, or
investments in, any other Person (other than to CN or any Subsidiary of
CN);
(h) (i) Except for any of the actions referred to in this clause
(h)(i) that is taken in the ordinary course of business consistent in
magnitude and character with past practice and with the terms of severance
or termination arrangements in effect or pending on the date of this
Agreement with respect to individuals with comparable positions or
responsibilities, and except for any of such actions that, in the
aggregate, are not material,
42
<PAGE>
CN shall not, and shall not permit any of its Subsidiaries to, grant any
severance or termination pay to, or enter into any termination or severance
arrangement with, any of its directors, executive officers or employees and
(ii) except for any of the actions referred to in this clause (h)(ii) that
is taken in the ordinary course of business consistent in magnitude and
character with past practice, and except for any of such actions that in
the aggregate are not material, CN shall not, and shall not permit any of
its Subsidiaries to, establish, adopt, enter into, amend or take action to
accelerate any rights or benefits under, or grant awards under, (A) any
plan or arrangement providing for options, stock, performance awards or
other forms of incentive or deferred compensation or (B) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, executive officers or employees.
Notwithstanding anything to the contrary in this Agreement, (i) CN may
offer any of its directors, officers or employees retention and incentive
arrangements comparable to those that BNSF has made available to its
directors, officers and employees prior to the date of this Agreement or
could offer to such directors, officers and employees under the terms of
Section 7.1(h) and (ii) CN may take such action as it deems appropriate to
--------------
compensate current or future holders of CN Options for any adverse Tax
consequences resulting directly or indirectly from the Arrangement. For
purposes of this Section 6.1(h) only, "material" shall mean material in
-------------- --------
relation to the overall compensation costs of CN and its Subsidiaries;
(i) CN shall not, and shall not permit any of its Subsidiaries to,
make any cash capital expenditures in any calendar year in an aggregate
amount in excess of $825 million;
(j) Neither CN's board of directors nor any committee thereof shall
adopt any resolution or take any other action to determine or declare that
any of the transactions contemplated by this Agreement will constitute a
change in control for purposes of any CN Employee Plan; and
(k) CN shall not, and shall not permit any of its Subsidiaries to,
agree or commit to do any of the actions prohibited by Sections 6.1(a)
---------------
through 6.1(j).
------
6.2 Tax Matters. From the date of this Agreement until the Arrangement
-----------
Effective Time, except as would not be reasonably likely to have a Material
Adverse Effect on CN, CN shall, and shall cause its Subsidiaries to, (i) file
all tax returns, statements, reports and forms (collectively, the "CN Post-
-------
Signing Returns") required to be filed with any taxing authority in accordance
- ---------------
with all applicable Laws; (ii) timely withhold or pay all Taxes required to be
withheld or shown as due and payable on the CN Post-Signing Returns that are so
filed and, as of the time of filing, the CN Post-Signing Returns shall be true,
complete and correct; (iii) make provision for all Taxes payable by CN and its
Subsidiaries for which no CN Post-Signing Return
43
<PAGE>
is due prior to the Arrangement Effective Time; and (iv) promptly notify BNSF of
any action, suit, proceeding, investigation, audit or claim pending against or
with respect to CN or any of its Subsidiaries in respect of any Tax where a
determination or decision against CN is more probable than not.
6.3 No Solicitations; Other Offers. (a) CN agrees that neither it nor
------------------------------
any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) (CN, its Subsidiaries and their officers, directors, employees,
agents and representatives being referred to as the "CN Representatives") not
------------------
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to an
Alternative Proposal. CN further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or any of its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
the CN Representatives not to, directly or indirectly, have any discussion with
or provide any confidential information or data relating to or in contemplation
of an Alternative Proposal or engage in any negotiations or discussions
concerning an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal; provided, however, that
-------- -------
nothing contained in this Agreement shall prevent either CN or its directors
from: (A) complying with Rule 14d-9 and Rule 14e-2 promulgated under the 1934
Act with regard to an Alternative Proposal or complying with the requirements of
the CBCA and applicable Canadian securities Laws in relation to the preparation
and dissemination of directors' circulars in response to take-over bids and the
calling and holding of requisitioned stockholders meetings; (B) prior to the
taking of the vote to be taken at the CN Stockholder Meeting, engaging in any
discussions or negotiations with, or providing any information to, any Person in
response to an unsolicited bona fide written Alternative Proposal; or (C) prior
to the taking of the vote to be taken at the CN Stockholder Meeting, subject to
the obligation of CN pursuant to Section 2.1(b) to duly convene the CN
--------------
Stockholder Meeting at which a vote of the stockholders of CN shall be taken
regarding the approval and adoption of the Arrangement Resolutions, recommending
such an unsolicited bona fide written Alternative Proposal to the stockholders
of CN if, and only to the extent that, with respect to the actions referred to
in clauses (B) or (C), (i) CN has complied with the terms of this Section 6.3,
-----------
(ii) the board of directors of CN concludes in good faith (after consultation
with its outside legal counsel and its financial advisors) that such Alternative
Proposal is reasonably capable of being completed, taking into account all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal, and would, if consummated, result in a transaction more
favorable to CN's stockholders from a financial point of view than the
transactions contemplated by this Agreement, (iii) the board of directors of CN
determines in good faith after consultation with outside legal counsel that the
failure to take such action would result in the reasonable likelihood that the
board of directors would breach its fiduciary duties under applicable Law, and
(iv) prior to entering into negotiations or discussions with, or providing any
information or data to, any Person in connection with an Alternative Proposal by
any such Person, the board of
44
<PAGE>
directors of CN shall receive from such Person an executed confidentiality
agreement on terms substantially similar to those contained in the
Confidentiality Agreement; provided, however, that such confidentiality
-------- -------
agreement shall contain terms that allow CN to comply with its obligations under
this Section 6.3.
-----------
(b) CN agrees that it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Alternative Proposal. CN agrees that it will take
the necessary steps to promptly inform each CN Representative of the obligations
undertaken in Section 6.3(a). CN agrees that it will notify BNSF promptly, but
--------------
in any event within twenty-four (24) hours, if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any CN
Representative indicating, in connection with such notice, the name of such
Person making such inquiry, proposal, offer or request and the substance of any
such inquiries, proposals or offers. CN thereafter shall keep BNSF informed, on
a timely basis, of the status and terms of any such inquiries, proposals or
offers and the status of any such discussions or negotiations. Without limiting
the generality of the foregoing, the notice delivered by CN commencing the CN
Five Business Day Window shall set forth all material terms of the Alternative
Proposal or other matter forming the basis for the withdrawal, modification or
change by CN's board of directors of its recommendation that the CN stockholders
approve and adopt the Arrangement Resolution and such notice shall be updated in
writing on a current basis in the event that any such material terms are
modified or changed. Without limiting BNSF's right to make proposals in general,
BNSF shall be permitted to make one or more proposals to CN during the CN Five
Business Day Window and such proposals shall be considered by CN. CN also agrees
that it will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of any
Alternative Proposal to return all confidential information heretofore furnished
to such Person by or on behalf of CN or any of its Subsidiaries.
ARTICLE VII
COVENANTS OF BNSF
-----------------
7.1 Conduct of BNSF. From the date of this Agreement until the Merger
---------------
Effective Time, except as provided in Section 7.1 of the BNSF Disclosure Letter,
-----------
BNSF and BNSF's Subsidiaries shall conduct their business in the ordinary course
of business consistent with past practice and shall use their reasonable best
efforts to preserve intact their business organizations and relationships with
third parties; provided, however, that nothing in this Section 7.1 shall be
-------- ------- -----------
deemed to prevent BNSF and its Subsidiaries from taking any action referred to
in clauses (b)(ii), (c), (f) or (g) of this Section 7.1 where the taking of such
-----------
action is not consistent with the past practices of BNSF and its Subsidiaries
if, but only if, such action is a Customary Action. Notwithstanding anything to
the contrary in this Agreement, BNSF shall be permitted to repurchase BNSF
Common Shares from time to time prior to the Closing in open market purchases,
at the prevailing market price; provided, however, that such repurchases shall
-------- -------
not, in
45
<PAGE>
the aggregate, have the effect of decreasing the number of issued and
outstanding BNSF Common Shares by more than 8.0% during any calendar year, as
compared to the number of issued and outstanding BNSF Common Shares at the
beginning of such calendar year. Without limiting the generality of the
foregoing, from the date of this Agreement until the Closing, without the
written consent of CN, which shall not be unreasonably withheld:
(a) BNSF shall not adopt or propose any change in their respective
constitutive documents;
(b) Except for the transactions contemplated by this Agreement, BNSF
shall not, and shall not permit any BNSF Subsidiary, to (i) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or (ii) make any
acquisition of any business or other assets, whether by means of merger,
consolidation or otherwise, other than in the ordinary course of business
consistent with past practices and other than acquisitions that are
Customary Actions; provided, however, that any wholly owned subsidiary of
-------- -------
BNSF may merge or consolidate with BNSF or any other wholly owned
subsidiary of BNSF and any wholly owned subsidiary of BNSF that is not a
Material Subsidiary may be liquidated or dissolved;
(c) BNSF shall not, and shall not permit any BNSF Subsidiary to,
sell, lease, license or otherwise dispose of any material assets or
property except (i) pursuant to existing contracts or commitments, (ii) in
the ordinary course of business consistent with past practice and (iii) any
such sale, lease, license or other disposition that is a Customary Action;
(d) BNSF shall not, and shall not permit any of its Subsidiaries to,
declare, set aside or pay any dividend or make any other distribution with
respect to any shares of BNSF capital stock, other than (i) in connection
with the adoption of the BNSF Shareholder Rights Plan or (ii) cash
dividends on BNSF Common Shares not in excess of $0.48 per share, per year;
(e) Except (i) as expressly permitted by Article II or Section
---------- -------
7.1(h), (ii) pursuant to existing contracts or commitments or (iii)
------
pursuant to BNSF Options and other awards outstanding on the date of this
Agreement, BNSF shall not, and shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any BNSF Securities, any BNSF Voting Debt, any securities or
ownership interests in any Material Subsidiary of BNSF or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any BNSF Securities, BNSF Voting Debt or securities or ownership
interests in any Material Subsidiary of BNSF;
46
<PAGE>
(f) Except for (i) borrowings under existing credit facilities,
replacements therefor and refinancings thereof, (ii) borrowings in the
ordinary course of business consistent with past practice or (iii)
borrowings that are Customary Actions, BNSF shall not, and shall not permit
any of its Subsidiaries to, incur any indebtedness for borrowed money or
guarantee any such indebtedness;
(g) Except for loans, advances, capital contributions or investments
made in the ordinary course of business consistent with past practice and
except for loans, advances, capital contributions or investments that are
Customary Actions, BNSF shall not, and shall not permit any of its
Subsidiaries to, make any loans, advances or capital contributions to, or
investments in, any other Person (other than to BNSF or any Subsidiary of
BNSF);
(h) (i) Except for any of the actions referred to in this clause
(h)(i) that is taken in the ordinary course of business consistent in
magnitude and character with past practice and with the terms of severance
or termination arrangements in effect or pending on the date of this
Agreement with respect to individuals with comparable positions or
responsibilities, and except for any of such actions that, in the
aggregate, are not material, BNSF shall not, and shall not permit any of
its Subsidiaries to, grant any severance or termination pay to, or enter
into any termination or severance arrangement with, any of its directors,
executive officers or employees, and (ii) except for any of the actions
referred to in this clause (h)(ii) that is taken in the ordinary course of
business consistent in magnitude and character with past practice (which
shall include normal period performance reviews and related compensation
and benefits increases and the provision of compensation and benefits
consistent with past practice for promoted or newly hired employees), and
except for any of such actions that in the aggregate are not material or
that are required by Law or the terms of an existing collective bargaining
agreement, BNSF shall not, and shall not permit any of its Subsidiaries to,
(A) establish, adopt, enter into, amend or take action to accelerate any
rights or benefits under, or grant awards under, (y) any plan or
arrangement providing for options, stock, performance awards or other forms
of incentive or deferred compensation or (z) any collective bargaining,
bonus, profit sharing, thrift, compensation, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any of its directors, executive officers or employees; or (B) increase
the salary, wage, bonus or other compensation of any of its directors,
executive officers or employees. For purposes of this Section 7.1(h) only,
--------------
"material" shall mean material in relation to the overall compensation
--------
costs of BNSF and its Subsidiaries;
(i) BNSF shall not, and shall not permit any of its Subsidiaries to,
make any cash capital expenditures in any calendar year in an aggregate
amount in excess of $1.7 billion;
47
<PAGE>
(j) Neither BNSF's board of directors nor any committee thereof shall
adopt any resolution or take any other action to determine or declare that
any of the transactions contemplated by this Agreement will constitute a
change in control for purposes of any BNSF Employee Plan; and
(k) BNSF shall not, and shall not permit any of its Subsidiaries to,
agree or commit to do any of the actions prohibited by Sections 7.1(a)
---------------
through 7.1(j).
------
7.2 Tax Matters. From the date of this Agreement until the Arrangement
-----------
Effective Time, except as would not be reasonably likely to have a Material
Adverse Effect on BNSF, BNSF shall, and shall cause its Subsidiaries to (i) file
all tax returns, statements, reports and forms (collectively, the "BNSF Post-
---------
Signing Returns") required to be filed with any taxing authority in accordance
- ---------------
with all applicable Laws; (ii) timely withhold or pay all Taxes required to be
withheld or shown as due and payable on the BNSF Post-Signing Returns that are
so filed and, as of the time of filing, the BNSF Post-Signing Returns shall be
true, complete and correct; (iii) make provision for all Taxes payable by BNSF
and its Subsidiaries for which no BNSF Post-Signing Return is due prior to the
Arrangement Effective Time; and (iv) promptly notify CN of any action, suit,
proceeding, investigation, audit or claim pending against or with respect to
BNSF or any of its Subsidiaries in respect of any Tax where a determination or
decision against BNSF is more probable than not.
7.3 No Solicitations; Other Offers. (a) BNSF agrees that neither it nor
------------------------------
any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) (BNSF, its Subsidiaries and their officers, directors, employees,
agents and representatives being referred to as the "BNSF Representatives") not
--------------------
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to an
Alternative Proposal. BNSF further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or any of its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
the BNSF Representatives not to, directly or indirectly, have any discussion
with or provide any confidential information or data to any Person relating to
or in contemplation of an Alternative Proposal or engage in any negotiations or
discussions concerning an Alternative Proposal, or otherwise facilitate any
effort or attempt to make or implement an Alternative Proposal; provided,
--------
however, that nothing contained in this Agreement shall prevent either BNSF or
- -------
its directors from: (A) complying with Rule 14d-9 and Rule 14e-2 promulgated
under the 1934 Act with regard to an Alternative Proposal; (B) prior to the
taking of the vote to be taken at the BNSF Stockholder Meeting, engaging in any
discussions or negotiations with, or providing any information to, any Person in
response to an unsolicited bona fide written Alternative Proposal by any such
Person; or (C) prior to the taking of the vote to be taken at the BNSF
Stockholder Meeting, subject to the obligation of BNSF pursuant to Section
-------
2.2(b) to duly convene the BNSF Stockholder Meeting at which a vote of the
- ------
48
<PAGE>
stockholders of BNSF shall be taken regarding the approval and adoption of this
Agreement and the transactions contemplated by this Agreement, recommending such
an unsolicited bona fide written Alternative Proposal to the stockholders of
BNSF if, and only to the extent that, with respect to the actions referred to in
clauses (B) or (C), (i) BNSF has complied with the terms of this Section 7.3,
-----------
(ii) the board of directors of BNSF concludes in good faith (after consultation
with its outside legal counsel and its financial advisors) that such Alternative
Proposal is reasonably capable of being completed, taking into account all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal, and would, if consummated, result in a transaction more
favorable to BNSF's stockholders from a financial point of view than the
transactions contemplated by this Agreement, (iii) the board of directors of
BNSF determines in good faith after consultation with outside legal counsel that
the failure to take such action would result in the reasonable likelihood that
the board of directors would breach its fiduciary duties to BNSF or its
stockholders under applicable Law and (iv) prior to entering into negotiations
or discussions with, or providing any information or data to, any Person in
connection with an Alternative Proposal by any such Person, the board of
directors of BNSF shall receive from such Person an executed confidentiality
agreement on terms substantially similar to those contained in the
Confidentiality Agreement; provided, however, that such confidentiality
-------- -------
agreement shall contain terms that allow BNSF to comply with its obligations
under this Section 7.3.
-----------
(b) BNSF agrees that it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Alternative Proposal. BNSF agrees that it will
take the necessary steps to promptly inform each BNSF Representative of the
obligations undertaken in Section 7.3(a). BNSF agrees that it will notify CN
--------------
promptly, but in any event within twenty-four (24) hours, if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such discussions or negotiations are sought to be initiated or continued
with, any BNSF Representative indicating, in connection with such notice, the
name of such Person making such inquiry, proposal, offer or request and the
substance of any such inquiries, proposals or offers. BNSF thereafter shall
keep CN informed, on a timely basis, of the status and terms of any such
inquires, proposals or offers and the status of any such discussions or
negotiations. Without limiting the generality of the foregoing, the notice
delivered by BNSF commencing the BNSF Five Business Day Window shall set forth
all material terms of the Alternative Proposal or other matter forming the basis
for the withdrawal, modification or change by BNSF's board of directors of its
recommendation that the BNSF stockholders approve and adopt this Agreement and
such notice shall be updated in writing on a current basis in the event that any
such material terms are modified or changed. Without limiting CN's right to
make proposals in general, CN shall be permitted to make one or more proposals
to BNSF during the BNSF Five Business Day Window and such proposals shall be
considered by BNSF. BNSF also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of any Alternative Proposal to return all confidential
49
<PAGE>
information heretofore furnished to such Person by or on behalf of BNSF or any
of its Subsidiaries.
7.4 Takeover Statutes; Rights Plan. BNSF shall take all actions necessary
------------------------------
to ensure that the representations and warranties set forth in Section 4.16
------------
remain true and correct at all times.
ARTICLE VIII
CONDITIONS TO THE BUSINESS COMBINATION
--------------------------------------
8.1 Conditions to the Obligations of Each Party. The obligations of BNSF,
-------------------------------------------
Merger Sub and CN to consummate the transactions contemplated by this Agreement,
including the Arrangement and the Merger, are subject to the satisfaction (or
waiver by each of BNSF and CN) of each of the following conditions:
(i) this Agreement and the transactions contemplated by this
Agreement shall have been approved and adopted by the stockholders of BNSF
in accordance with applicable Law;
(ii) the Arrangement Resolution shall have been approved and adopted
by the stockholders of CN in accordance with applicable Law and, subject to
clause (iii) below, in accordance with any conditions that may be imposed
by the Interim Order;
(iii) the Interim Order and Final Order shall each have been
obtained (and shall not have been set aside or modified) in form and terms
that do not (A) change the Exchange Ratio or (B) impose on BNSF, Newco, CN
or any of their respective Subsidiaries any other terms or conditions that
would significantly and adversely affect the economic benefits of the
transactions contemplated by this Agreement to BNSF, CN and their
stockholders, taken as a whole;
(iv) the STB shall have issued a decision (which decision shall not
have been stayed or enjoined) that (A) constitutes a final order approving,
exempting or otherwise authorizing consummation of the transactions
contemplated by this Agreement (or subsequently presented to the STB by
agreement of BNSF and CN), including the Arrangement and the Merger, as may
require such authorization and (B) does not (1) change the Exchange Ratio
or (2) impose on BNSF, Newco, CN or any of their respective Subsidiaries
any other terms or conditions (including labor protective provisions, but
excluding conditions heretofore imposed by the United States Interstate
Commerce Commission in New York Dock Railway-Control-Brooklyn Eastern
District, 360 I.C.C. 60 (1979)) that would significantly and adversely
affect the economic benefits of the transactions contemplated by this
Agreement to BNSF, CN and their stockholders, taken as a whole;
50
<PAGE>
(v) any applicable waiting period and any extensions thereof
under the Competition Act shall have expired and the Commission shall have
provided the parties with assurances that the Commissioner shall not take
any action to enforce any relevant provision of the Competition Act in
respect of any of the transactions contemplated by this Agreement on terms
that would significantly and adversely affect the economic benefits of the
transactions contemplated by this Agreement to BNSF, CN and their
stockholders, taken as a whole;
(vi) all actions by or in respect of or filings with any
Governmental Entity required to permit the consummation of the transactions
contemplated by this Agreement (other than the Interim Order and Final
Order, the STB approval, and the expiration of the applicable waiting
periods under the Competition Act, which are addressed in clauses (ii)
through (v) above) shall have been obtained, but excluding any consent,
approval, clearance or confirmation the failure to obtain which would not
significantly and adversely affect the economic benefits of the
transactions contemplated by this Agreement to BNSF, CN and their
stockholders, taken as a whole;
(vii) no court, arbitrator or Governmental Entity shall have issued
any order, and there shall not be any statute, rule or regulation,
restraining or prohibiting (A) the operation of the business of Newco and
CN and their respective Subsidiaries after the Arrangement Effective Time
in a manner that would significantly and adversely affect the economic
benefits of the transactions contemplated by this Agreement to BNSF, CN and
their stockholders, taken as a whole, or (B) the consummation of the
transactions contemplated by this Agreement;
(viii) CN shall have received an opinion from Davis Polk & Wardwell
substantially in the form and content of Exhibit K;
---------
(ix) BNSF shall have received an opinion from Mayer, Brown & Platt
substantially in the form and content of Exhibit L;
---------
(x) the Form S-4, Form F-4, Form S-3 and Form S-8 registration
statements shall have become effective under the 1933 Act; no stop order
suspending the effectiveness of the Form S-4, Form F-4, Form S-3 and Form
S-8 registration statements shall have been issued; and no proceedings for
that purpose shall have been initiated or be threatened by the SEC; and
(xi) the Newco Common Shares and CN Voting Shares constituting
Newco Stapled Units issuable pursuant to the Merger and the Arrangement
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, and the CN Exchangeable Shares and
CN Voting Shares constituting the CN Stapled Units issuable pursuant to the
Arrangement shall have been conditionally
51
<PAGE>
approved for listing on The Toronto Stock Exchange, subject to filing of
required documentation.
8.2 Additional Conditions to the Obligations of BNSF. The obligations of
------------------------------------------------
BNSF to consummate the transactions contemplated by this Agreement are further
subject to the satisfaction (or waiver by BNSF) of each of the following
conditions:
(i) CN shall have performed in all material respects all of its
obligations under this Agreement required to be performed by it at or prior
to the Merger Effective Time;
(ii) the representations and warranties of CN shall have been
accurate both when made and at and as of the Merger Effective Time as if
made at and as of that time (except to the extent such representations and
warranties speak as of an earlier time, in which event such representations
and warranties shall be true and correct as of such earlier time), except
where the failure of such representations and warranties (other than those
in Section 3.5) to be true and correct, individually or in the aggregate,
-----------
would not be reasonably likely to have a Material Adverse Effect on CN (it
being understood that the representations and warranties of CN made in
Section 3.5 must be accurate in all significant respects when made and,
-----------
except as contemplated by this Agreement, at and as of the Merger Effective
Time as if made at and as of that time); and
(iii) since the date of this Agreement, there shall not have been
any event, occurrence, development or state of circumstances that,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on CN (other than as a result of changes
in the conditions, including economic and political developments,
applicable to the railroad industry in general or any changes in the
economy or securities markets in general).
8.3 Additional Conditions to the Obligations of CN. The obligations of CN
----------------------------------------------
to consummate the transactions contemplated by this Agreement are further
subject to the satisfaction (or waiver by CN) of each of the following
conditions:
(i) BNSF shall have performed in all material respects all of its
respective obligations under this Agreement required to be performed by it
at or prior to the Arrangement Effective Time; and
(ii) the representations and warranties of BNSF shall have been
accurate both when made and at and as of the Arrangement Effective Time as
if made at and as of that time (except to the extent such representations
and warranties speak as of an earlier time, in which event such
representations and warranties shall be true and correct as of such earlier
time), except where the failure of such representations and warranties
(other than
52
<PAGE>
those in Sections 4.5 and 4.16) to be true and correct, individually or in
------------ ----
the aggregate, would not be reasonably likely to have a Material Adverse
Effect on BNSF (it being understood that the representations and warranties
of BNSF made in Section 4.5 and 4.16 must be accurate in all significant
respects when made and, except as contemplated by this Agreement, at and as
of the Arrangement Effective Time as if made at and as of that time); and
(iii) since the date of this Agreement, there shall not have been
any event, occurrence, development or state of circumstances that,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on BNSF (other than as a result of
changes in the conditions, including economic and political developments,
applicable to the railroad industry in general or any changes in the
economy or securities markets in general).
ARTICLE IX
TERMINATION
-----------
9.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated by this Agreement may be abandoned at any time prior to the Closing
(notwithstanding any approval of this Agreement by the stockholders of BNSF or
CN):
(i) by mutual written consent of BNSF and CN;
(ii) by either BNSF or CN, if the Closing has not occurred by
December 31, 2002 (the "Outside Date");
------------
(iii) by either BNSF or CN, if (a) any judgment, injunction, order
or decree enjoining BNSF or CN from consummating the Merger or Arrangement
is entered and such judgment, injunction, order or decree shall become
final and nonappealable or (b) the Court elects not to issue the Final
Order and the Court's decision on the matter has been fully appealed (and
not reversed) or has become final and nonappealable;
(iv) by either BNSF or CN, if the approvals of the stockholders of
BNSF or CN contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a duly held meeting of
stockholders or of any adjournment thereof;
(v) by BNSF, if the board of directors of CN shall have withdrawn,
adversely modified or changed its approval or recommendation of this
Agreement, the transactions contemplated by this Agreement or the
Arrangement Resolution;
53
<PAGE>
(vi) by CN, if the board of directors of BNSF shall have withdrawn,
adversely modified or changed its approval or recommendation of this
Agreement or the transactions contemplated by this Agreement;
(vii) by BNSF, upon a breach of any representation, warranty,
covenant or agreement of CN, or if any representation or warranty of CN
shall become untrue, in either case such that the conditions set forth in
Section 8.2 would be incapable of being satisfied by the Outside Date (or
-----------
as otherwise extended), provided that a wilful breach shall be deemed to
cause such conditions to be incapable of being satisfied by such date;
(viii) by CN, upon a breach of any representation, warranty,
covenant or agreement of BNSF, or if any representation or warranty of BNSF
shall become untrue, in either case such that the conditions set forth in
Section 8.3 would be incapable of being satisfied by the Outside Date (or
-----------
as otherwise extended), provided that a wilful breach shall be deemed to
cause such conditions to be incapable of being satisfied by such date; or
(ix) by either BNSF or CN at any time prior to December 31, 2002, if
the STB shall have issued a decision (which decision shall not have been
stayed or enjoined) that (A) constitutes a final order approving, exempting
or otherwise authorizing consummation of the transactions contemplated by
this Agreement (or subsequently presented to the STB by agreement of BNSF
and CN), including the Arrangement and the Merger, as may require such
authorization and (B)(1) changes the Exchange Ratio or (2) imposes on BNSF,
Newco, CN or any of their respective Subsidiaries any other terms or
conditions (including labor protective provisions, but excluding conditions
heretofore imposed by the United States Interstate Commerce Commission in
New York Dock Railway-Control-Brooklyn Eastern District, 360 I.C.C. 60
(1979)) that would significantly and adversely affect the economic benefits
of the transactions contemplated by this Agreement to BNSF, CN and their
stockholders, taken as a whole (such decision, an "Adverse STB Decision").
--------------------
9.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 9.1, this Agreement shall become void and of no effect with no liability
- -----------
on the part of any party to this Agreement, except that (i) the agreements
contained in Sections 3.14, 4.14, 4.16, 5.15, 7.4, 10.4, 10.5, 10.6, 10.7, 10.8,
------------- ---- ---- ---- --- ---- ---- ---- ---- ----
10.10, 10.11, and 10.12 shall survive such termination and (ii) no such
- ----- ----- -----
termination shall relieve any party of any liability or damages resulting from
any breach by that party of this Agreement.
54
<PAGE>
ARTICLE X
MISCELLANEOUS AND GENERAL
-------------------------
10.1 Modification, Amendment and Assignment. Subject to the provisions of
--------------------------------------
applicable Law, at any time prior to the Closing, the parties to this Agreement
may modify or amend this Agreement, by written agreement executed and delivered
by duly authorized officers of the respective parties. This Agreement may not
be assigned by any party without the consent of the other parties to this
Agreement.
10.2 Waiver of Conditions. (a) Any party to this Agreement may (i) extend
--------------------
the time for the performance of any of the obligations or other acts of the
other parties to this Agreement, (ii) waive any inaccuracies in the
representations and warranties of the other parties to this Agreement contained
in this Agreement or in any document delivered by the other pursuant to this
Agreement or (iii) waive compliance with any of the agreements, or satisfaction
of any of the conditions, contained in this Agreement by the other parties to
this Agreement. Any agreement on the part of a party to this Agreement to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by such party.
(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. Except as
otherwise provided in this Agreement, the rights and remedies provided in this
Agreement shall be cumulative and not exclusive of any rights or remedies
provided by Law.
10.3 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
10.4 Expenses; Certain Payments. (a) Except as otherwise provided in
--------------------------
this Section 10.4 or agreed in writing by the parties, each party shall bear its
------------
own expenses (including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by it) incurred in connection with this Agreement and the transactions
contemplated by this Agreement. CN and BNSF shall share equally all expenses
incurred by either party in connection with any action approved or authorized by
the Implementation Committee.
(b) BNSF shall pay CN a fee equal to $450 million (the "BNSF Termination
----------------
Fee"), which amount shall be payable by wire transfer of same day funds, in the
- ---
event that (i) an Alternative Proposal shall have been made to BNSF or shall
have been made directly to BNSF's stockholders generally or any Person shall
have publicly announced an intention (whether or not conditional) to make an
Alternative Proposal with respect to BNSF and thereafter (A) BNSF's stockholders
do not adopt this Agreement at the BNSF Stockholder Meeting and (B) this
55
<PAGE>
Agreement is terminated by either CN or BNSF; or (ii) this Agreement is
terminated by CN pursuant to Section 9.1(vi) or (viii) (but, with respect to
--------------- ------
Section 9.1(viii), solely with respect to a breach of Section 7.3). Such
- ----------------- -----------
payment shall be due and payable no later than the business day after the date
that notice of termination of this Agreement is first given. BNSF acknowledges
that the agreements contained in this Section 10.4(b) are an integral part of
---------------
the transactions contemplated by this Agreement and that, without these
agreements, CN would not enter into this Agreement. Accordingly, if BNSF fails
to pay when due the amount due pursuant to this Section 10.4(b) and, in order to
---------------
obtain such payment, CN commences a suit which results in a judgment against
BNSF for the fee set forth in this Section 10.4(b), BNSF shall pay to CN its
---------------
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Citibank
N.A. in effect on the date such payment was required to be made.
(c) CN shall pay BNSF a fee equal to $200 million (the "CN Termination
--------------
Fee"), which amount shall be payable by wire transfer of same day funds, in the
event that (i) an Alternative Proposal shall have been made to CN or shall have
been made directly to CN's stockholders generally or any Person shall have
publicly announced an intention (whether or not conditional) to make an
Alternative Proposal with respect to CN and thereafter (A) CN's stockholders do
not adopt the Arrangement Resolution at the CN Stockholder Meeting and (B) this
Agreement is terminated by either BNSF or CN; or (ii) this Agreement is
terminated by BNSF pursuant to Section 9.1(v) or (vii) (but, with respect to
-------------- -----
9.1(vii), solely with respect to a breach of Section 6.3). Such payment shall
- -------- -----------
be due and payable no later than the business day after the date that notice of
termination of this Agreement is first given. CN acknowledges that the
agreements contained in this Section 10.4(c) are an integral part of the
---------------
transactions contemplated by this Agreement and that, without these agreements,
BNSF would not enter into this Agreement. Accordingly, if CN fails to pay
promptly the amount due pursuant to this Section 10(c), and, in order to obtain
-------------
such payment, BNSF commences a suit which results in a judgment against CN for
the fee set forth in this Section 10.4(c), CN shall pay to BNSF its costs and
---------------
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank N.A. in effect
on the date such payment was required to be made.
(d) BNSF shall pay CN a fee equal to $300 million (the "BNSF STB
--------
Termination Fee"), which amount shall be payable by wire transfer of same day
- ---------------
funds, in the event that (i) BNSF sends CN a written notice (the "BNSF STB
--------
Notice") stating either that BNSF intends to terminate this Agreement pursuant
- ------
to Section 9.1(ix) or does not intend to consummate the transactions
---------------
contemplated by this Agreement in reliance on Section 8.1(iv); (ii) within five
---------------
business days after the date that CN receives BNSF's notice referred to in
clause (i) of this sentence, CN sends BNSF a written notice that,
notwithstanding the alleged Adverse STB Decision, CN is willing to consummate
the transactions contemplated by this Agreement; (iii) within three business
days after receiving the notice referred to in clause (ii) of this sentence,
BNSF does not send CN a written notice that, notwithstanding the alleged Adverse
STB
56
<PAGE>
Decision, BNSF is willing to consummate the transactions contemplated by this
Agreement and is revoking the BNSF STB Notice ; and (iv) the conditions to
Closing for CN and BNSF other than the condition in Section 8.1(iv) (and any
---------------
other condition to Closing to the extent relating to any matter referred to in
Section 8.1(iv)) have been or promptly could be satisfied or, if appropriate,
- ---------------
waived. If CN sends the notice referred to in clause (ii) above, CN shall be
deemed to have waived its right to terminate this Agreement pursuant to Section
-------
9.1(ix) (or pursuant to any other provision of this Agreement for reasons
- -------
relating to any matter referred to in Section 9.1(ix)) and to have taken the
position that the condition in Section 8.1(iv) has been satisfied and that all
---------------
of the other conditions to Closing for CN have been or promptly could be
satisfied or waived. Upon the revocation referred to in clause (iii) above,
BNSF shall be deemed to have waived its right to terminate this Agreement
pursuant to Section 9.1(ix) (or pursuant to any other provision of this
---------------
Agreement for reasons relating to any matter referred to in Section 9.1(ix)) and
---------------
to have taken the position that the condition in Section 8.1(iv) has been
---------------
satisfied and that all of the other conditions to closing for BNSF have been or
promptly could be satisfied or waived. If BNSF fails to deliver the written
notice contemplated by clause (i) of the first sentence in this Section 10.4(d)
---------------
within five business days of the issuance by the STB of a decision (which
decision has not been stayed or enjoined) constituting a final order approving,
exempting or otherwise authorizing the consummation of the transactions
contemplated by this Agreement, BNSF shall be deemed to have waived the
condition to Closing set forth in Section 8.1(iv) (as well as any other
---------------
condition to Closing for reasons relating to any matter referred to in Section
-------
8.1(iv)) as well as its right to terminate this Agreement pursuant to Section
- ------- -------
9.1(ix) (or pursuant to any other provision of this Agreement for reasons
- -------
relating to any matter referred to in Section 9.1(ix)). Assuming that clauses
----------------
(i), (ii), (iii) and (iv) above have been satisfied, the BNSF STB Termination
Fee shall be due and payable no later than the second business day after the
notice referred to in clause (iii) above has not been and can no longer be
given. If CN does not send the notice referred to in clause (ii) above within
five business days after the date on which CN receives BNSF's notice delivered
pursuant to clause (i) of the first sentence of this Section 10.4(d), CN shall
---------------
be deemed to have waived its right to send the notice referred to in clause (ii)
above, BNSF shall not owe the BNSF STB Termination Fee and the BNSF STB Notice
shall be deemed final. The BNSF STB Notice shall also be deemed to be final if
the BNSF STB Termination Fee becomes due and payable. This Agreement shall
terminate at such time the BNSF STB Notice shall be deemed final in accordance
with either of the two immediately preceding sentences. BNSF acknowledges that
the agreements contained in this Section 10.4(d) are an integral part of the
---------------
transactions contemplated by this Agreement and that, without these agreements,
CN would not enter into this Agreement. Accordingly, if BNSF fails to pay the
amount when due pursuant to this Section 10.4(d) and, in order to obtain such
---------------
payment, CN commences a suit which results in a judgment against BNSF for the
fee set forth in this Section 10.4(d), BNSF shall pay to CN its costs and
---------------
expenses (including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. in effect
on the date such payment was required to be made. Nothing in this Section
-------
10.4(d) shall prevent CN from asserting that no Adverse STB Decision has been
- -------
issued and that the condition to Closing in Section 8.1(iv) has been satisfied,
----------------
in either case, despite
57
<PAGE>
BNSF's claim to the contrary and that no termination right arose under Section
-------
9.1(ix); provided, however, that CN shall be deemed to have waived the right to
- ------- -------- -------
make such an assertion if it sends the notice referred to in clause (ii) above.
BNSF may not terminate this Agreement pursuant to Section 9.1(ix) or elect not
---------------
to consummate the transactions contemplated by this Agreement on the basis of
the condition set forth in Section 8.1(iv) unless BNSF has complied with the
---------------
provisions of this Section 10.4(d).
(e) CN shall pay BNSF a fee equal to $150 million (the "CN STB Termination
------------------
Fee"), which amount shall be payable by wire transfer of same day funds, in the
- ---
event that (i) CN sends BNSF a written notice (the "CN STB Notice") stating
-------------
either that CN intends to terminate this Agreement pursuant to Section 9.1(ix)
---------------
or does not intend to consummate the transactions contemplated by this Agreement
in reliance on Section 8.1(iv); (ii) within five business days after the date
---------------
that BNSF receives CN's notice referred to in clause (i) of this sentence, BNSF
sends CN a written notice that, notwithstanding the alleged Adverse STB
Decision, BNSF is willing to consummate the transactions contemplated by this
Agreement; (iii) within three business days after receiving the notice referred
to in clause (ii) of this sentence, CN does not send BNSF a written notice that,
notwithstanding the alleged Adverse STB Decision, CN is willing to consummate
the transactions contemplated by this Agreement and is revoking the CN STB
Notice; and (iv) the conditions to Closing for BNSF and CN other than the
condition in Section 8.1(iv) (and any other condition to Closing to the extent
---------------
relating to any matter referred to in Section 8.1(iv)) have been or promptly
----------------
could be satisfied or, if appropriate, waived. If BNSF sends the notice
referred to in clause (ii) above, BNSF shall be deemed to have waived its right
to terminate this Agreement pursuant to Section 9.1(ix) (or pursuant to any
---------------
other provision of this Agreement for reasons relating to any matter referred to
in Section 9.1 (ix)) and to have taken the position that the condition in
----------------
Section 8.1(iv) has been satisfied and that all of the other conditions to
- ---------------
Closing for BNSF have been or promptly could be satisfied or waived. Upon the
revocation referred to in clause (iii) above, CN shall be deemed to have waived
its right to terminate this Agreement pursuant to Section 9.1(ix) (or pursuant
---------------
to any other provision of this Agreement for reasons relating to any matter
referred to in Section 9.1 (ix)) and to have taken the position that the
----------------
condition in Section 8.1(iv) has been satisfied and that all of the other
---------------
conditions to closing for CN have been or promptly could be satisfied or waived.
If CN fails to deliver the written notice contemplated by clause (i) of the
first sentence in this Section 10.4(e) within five business days of the issuance
---------------
by the STB of a decision (which decision has not been stayed or enjoined)
constituting a final order approving, exempting or otherwise authorizing the
consummation of the transactions contemplated by this Agreement, CN shall be
deemed to have waived the condition to Closing set forth in Section 8.1(iv) (as
---------------
well as any other condition to Closing for reasons relating to any matter
referred to in Section 8.1(iv)) as well as its right to terminate this Agreement
----------------
pursuant to Section 9.1(ix) (or pursuant to any other provision of this
---------------
Agreement for reasons relating to any matter referred to in Section 9.1(ix)).
----------------
Assuming that clauses (i), (ii), (iii) and (iv) above have been satisfied, the
CN STB Termination Fee shall be due and payable no later than the second
business day after the notice referred to in clause (iii) above has not been and
can no longer be given. If BNSF does not send the notice referred to in clause
58
<PAGE>
(ii) above within five business days after the date on which BNSF receives CN's
notice delivered pursuant to clause (i) of the first sentence of this Section
-------
10.4(e), BNSF shall be deemed to have waived its right to send the notice
- -------
referred to in clause (ii) above, CN shall not owe the CN STB Termination Fee
and the CN STB Notice shall be deemed final. The CN Notice shall also be deemed
to be final if the CN STB Termination Fee becomes due and payable. This
Agreement shall terminate at such time the CN Notice shall be deemed final in
accordance with either of the two immediately preceding sentences. CN
acknowledges that the agreements contained in this Section 10.4(e) are an
---------------
integral part of the transactions contemplated by this Agreement and that,
without these agreements, BNSF would not enter into this Agreement.
Accordingly, if CN fails to pay the amount when due pursuant to this Section
-------
10.4(e) and, in order to obtain such payment, BNSF commences a suit which
- -------
results in a judgment against CN for the fee set forth in this Section 10.4(e),
---------------
CN shall pay to BNSF its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made. Nothing in this Section 10.4(e) shall prevent BNSF from asserting
---------------
that no Adverse STB Decision has been issued and that the condition to Closing
in Section 8.1(iv) has been satisfied, in either case, despite CN's claim to the
----------------
contrary and that no termination right arose under Section 9.1(ix); provided,
--------------- --------
however, that BNSF shall be deemed to have waived the right to make such an
- -------
assertion if it sends the notice referred to in clause (ii) above. CN may not
terminate this Agreement pursuant to Section 9.1(ix) or elect not to consummate
---------------
the transactions contemplated by this Agreement on the basis of the condition
set forth in Section 8.1(iv) unless CN has complied with the provisions of this
---------------
Section 10.4(e).
- ---------------
10.5 Governing Law and Venue; Waiver of Jury Trial. (a) This Agreement
---------------------------------------------
shall be deemed to be made in and in all respects shall be interpreted,
construed and governed by and in accordance with the Laws of the State of New
York without regard to the conflict of law principles thereof; provided,
--------
however, that matters relating to CN,s corparate affairs and the Arrangement
- -------
shall be governed by the Laws of Canada without regard to conflict of laws
principles thereof and matters relating to BNSF's corporate affairs and the
Merger shall be governed by the Laws of Delaware without regard to conflict of
laws principles thereof. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of both the courts of the State
of Delaware and of the United States of America located in Wilmington, Delaware
(the "Delaware Courts") and the Quebec Superior Court located in Montreal,
---------------
Quebec (the "Quebec Court") for any litigation arising out of or
------------
relating to this Agreement and the transactions contemplated by this Agreement,
waive any objection to the laying of venue of any such litigation in the
Delaware Courts or the Quebec Court and agree not to plead or claim in any
Delaware Court or the Quebec Court that such litigation brought therein has been
brought in an inconvenient forum; provided, however, that the parties
-------- -------
agree that any proceedings in the Quebec Court arising out of or relating
to this Agreement and the transactions contemplated by this Agreement shall be
conducted in English and all written documents relating to any such proceedings
shall be written in English.
59
<PAGE>
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.5.
------------
10.6 Notices. Notices, requests, instructions or other documents to be
-------
given under this Agreement shall be in writing and shall be deemed given (i)
when sent if sent by facsimile, provided that a copy of the facsimile is
promptly sent by U.S. mail and confirmation of receipt has been delivered, (ii)
when delivered, if delivered personally to the intended recipient and (iii) one
business day later, if sent by overnight delivery via an international courier
service and, in each case, addressed to a party at the following address for
such party:
If to BNSF or Newco:
Burlington Northern Santa Fe Corporation
2650 Lou Menk Drive
Fort Worth, Texas 76131
Attention: Chief Executive Officer
Fax: (817) 352-7100
and
Burlington Northern Santa Fe Corporation
2650 Lou Menk Drive
Fort Worth, Texas 76131
Attention: General Counsel
Fax: (817) 352-7111
60
<PAGE>
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Scott J. Davis
James T. Lidbury
Fax: (312) 701-7711
and
Tory Haythe
Suite 3000, Aetna Tower
P.O. Box 270, TD Centre
79 Wellington Street West
Toronto, Canada M5K 1N2
Attention: James C. Baillie
Peter D. Ballantyne
Fax: (416) 865-7380
and if to CN:
Canadian National Railway Company
935 de la Gauchetiere Street West
Montreal, Quebec H3B 2M9
Attention: Chief Executive Officer
Fax: (514) 875-8703
and
Canadian National Railway Company
935 de la Gauchetiere Street West
Montreal, Quebec H3B 2M9
Attention: General Counsel
Fax: (514) 399-7627
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Winthrop B. Conrad, Jr.
61
<PAGE>
David L. Caplan
Fax: (212) 450-4800
and
Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario M5L 1B9
Attention: John M. Stransman
Robert W.A. Nicholls
Fax: (416) 947-0866
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
10.7 Entire Agreement. This Agreement (including any exhibits to this
----------------
Agreement and the ancillary agreements contemplated by this Agreement), the
Confidentiality Agreement, the BNSF Disclosure Letter and the CN Disclosure
Letter constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties with respect to the subject matter of this Agreement.
EACH PARTY TO THIS AGREEMENT AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER CN NOR BNSF MAKES ANY
REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER
REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH
RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
10.8 No Third Party Beneficiaries. This Agreement is not intended to
-----------------------------
confer upon any Person other than the parties to this Agreement any rights or
remedies under this Agreement.
10.9 Severability. The provisions of this Agreement and any other
------------
agreement contemplated by this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision of this Agreement or any other
agreement contemplated by this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement or any provisions of
such other agreements. Without limiting the generality of the foregoing, the
invalidity or unenforceability of any provision of any such other agreement
shall not affect the
62
<PAGE>
validity or enforceability of any provision of this Agreement. If any provision
of this Agreement or any other agreement contemplated by this Agreement or the
application thereof to any Person or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (ii) the
remainder of this Agreement or any provisions of such other agreements and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
10.10 Interpretation. The table of contents and headings in this
--------------
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
10.11 Fair Construction. This Agreement shall be deemed to be the joint
-----------------
work product of the parties without regard to the identity of the draftsperson,
and any rule of construction that a document shall be interpreted or construed
against the drafting party shall not be applicable.
10.12 Limitation on Liability for Misrepresentations. Neither BNSF nor CN
----------------------------------------------
shall have any liability for any breach of a representation or warranty
contained in this Agreement in respect of which the other party has notified
BNSF or CN, as the case may be, in writing that it has performed satisfactory
due diligence (a "Notified Matter"). Neither BNSF nor CN shall be permitted to
---------------
assert that any condition to such party's obligation to consummate the
transactions contemplated by this Agreement has not been satisfied as a result
of any Notified Matter.
10.13 Survival. The representations and warranties and agreements
--------
contained in this Agreement and in any certificate or other writing delivered
pursuant to this Agreement shall terminate at the Merger Effective Time, except
for the agreements contained in Sections 5.11(f), 10.4(a), 10.5, 10.6, 10.7,
---------------- ------- ---- ---- ----
10.8, 10.10, 10.11 and 10.13; provided, however, that nothing in this Agreement
- ---- ----- ----- ----- --------- -------
shall be deemed to affect the terms of the Confidentiality Agreement, including
the survival periods for the terms of the Confidentiality Agreement.
* * * * * * * *
63
<PAGE>
Each of the parties to this Agreement has caused this Agreement to be
executed on its behalf by a duly authorized officer, all as of the day and year
first above written.
CANADIAN NATIONAL RAILWAY COMPANY
By: /s/ Paul M. Tellier
-------------------------------------
Name: Paul M. Tellier
Title: President and Chief Executive Officer
BURLINGTON NORTHERN SANTA FE CORPORATION
By: /s/ Robert D. Krebs
-------------------------------------
Name: Robert D. Krebs
Title: Chairman and Chief Executive Officer
NORTH AMERICAN RAILWAYS, INC.
By: /s/ Jean Pierre Ouellet
-------------------------------------
Name: Jean Pierre Ouellet
Title: Treasurer and Secretary
WESTERN MERGER SUB, INC.
By: /s/ Jeffrey R. Moreland
-------------------------------------
Name: Jeffrey R. Moreland
Title: President
64
<PAGE>
Exhibit "C"
CANADIAN NATIONAL RAILWAY COMPANY
RESOLUTION OF THE CN SECURITYHOLDERS
BE IT RESOLVED THAT:
1. The Arrangement (the "Arrangement") under the section 192 of the Canada
Business Corporations Act (the "CBCA") involving Canadian National Railway
Company (the "Corporation"), as more particularly described and set forth in
the management Information Circular (the "Circular") of the Corporation
accompanying the notice of this meeting (as the Arrangement may be modified
or amended) is hereby authorized, approved and adopted.
2. The Plan of Arrangement (the "Plan of Arrangement") involving the
Corporation, the full test of which is set forth in of the Circular, (as the
same may be or may have been amended) is hereby approved and adopted.
3. Notwithstanding that this resolution has been passed (and the Arrangement
adopted) by the shareholders and optionholders of the Corporation, or that
the Arrangement has been approved by the Quebec Superior Court, the
directors of the Corporation are hereby authorized:
(a) to amend the combination agreement (the "Combination Agreement") made as
of December 18, 1999 between the Corporation, Burlington Northern Santa
Fe Corporation ("BNSF") and North American Railways, Inc. ("Newco"),
providing for a merger involving BNSF and Newco and the Arrangement, to
the extent permitted by the Combination Agreement; and
(b) to amend the Plan Arrangement to the extent permitted by the Combination
Agreement; and
(c) not to proceed with the Arrangement at any time prior to the issue of a
certificate of arrangement under the CBCA without the future approval of
the shareholders and optionholders of the Corporation, but only if the
Combination Agreement is terminated in accordance with Article Nine
thereof.
4. Any officer or director of the Corporation is hereby authorized and directed
for and on behalf of the Corporation to execute, under the seal of the
Corporation or otherwise, and to deliver articles of arrangement, and such
<PAGE>
-2-
other documents as are necessary or desirable, to the Director under the
CBCA in accordance with the Combination Agreement for filing.
5. Any officer or director of the Corporation is hereby authorized and
directed for and on behalf of the Corporation to execute or cause to be
executed, under the seal of the Corporation or otherwise, and to deliver or
cause to be delivered, all such other documents, agreements and
instruments, and to perform or cause to be performed, all such other acts
and things as in such officer's or director's opinion may be necessary or
desirable to carry out the intent of the foregoing resolution and the
matters authorized thereby, such determination to be conclusively evidenced
by the execution and delivery of such document, agreement or instrument, or
the doing of any such act or thing.
<PAGE>
Exhibit D
---------
FORM OF CO-OPERATION AGREEMENT
NORTH AMERICAN RAILWAYS, INC.
-and-
[NAR HOLDINGS COMPANY]
- and -
CANADIAN NATIONAL RAILWAY COMPANY
- --------------------------------------------------------------------------------
CO-OPERATION AGREEMENT
- --------------------------------------------------------------------------------
. , 200.
<PAGE>
-ii-
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. GOVERNANCE OF THE CORPORATIONS.................................................................. 2
1.1. Core Principles................................................................................ 2
1.2. Identicality of the Boards..................................................................... 2
1.3. Governance..................................................................................... 2
ARTICLE 2. SHAREHOLDER MATTERS............................................................................. 4
2.1. Place of Shareholder Meetings.................................................................. 4
2.2. Record Date.................................................................................... 5
2.3. Rights of Dissent.............................................................................. 5
2.4. CN Special Limited Voting Shares............................................................... 5
ARTICLE 3. COVENANTS RELATING TO DIVIDENDS AND OTHER MATTERS............................................... 5
3.1. Dividends...................................................................................... 5
3.2. Other Covenants................................................................................ 6
3.3. Reservation of Newco Common Shares............................................................. 7
3.4. Reservation of CN Voting Shares................................................................ 7
3.5. Notification of Certain Events................................................................. 7
3.6. Issuance of Newco Common Shares to CN.......................................................... 8
3.7. Qualification of Trading Units................................................................. 8
ARTICLE 4. Share Capital................................................................................... 9
4.1. Distributions on Newco Common Shares........................................................... 9
4.2. Subdivisions, Consolidations and Reclassifications of Newco Common Shares...................... 10
4.3. Changes to CN Voting Shares and CN Exchangeable Shares......................................... 10
4.4. Distributions on CN Exchangeable Shares........................................................ 10
4.5. Subdivisions, Consolidations and Reclassifications of CN Exchangeable Shares................... 11
4.6. Economic Equivalence........................................................................... 12
4.7. Issuance of Shares............................................................................. 12
4.8. Other Equity Issuances......................................................................... 12
4.9. Tender Offers.................................................................................. 12
4.10. Self-Tenders................................................................................... 13
4.11. No Transfer of CN Special Limited Voting Shares or CN Non-voting Equity Shares................. 13
ARTICLE 5. financial statements AND STOCK EXCHANGE LISTINGS................................................ 13
5.1. Fiscal Year.................................................................................... 13
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C>
5.2. Auditors......................................................... 13
5.3. Financial Statements............................................. 14
5.4. Stock Exchange Listings and Public Documents..................... 14
ARTICLE 6. AMENDMENT AND TERMINATION....................................... 15
6.1. Amendment........................................................ 15
6.2. Termination...................................................... 15
ARTICLE 7. INTERPRETATION AND GENERAL PROVISIONS........................... 16
7.1. Definitions...................................................... 16
7.2. Definitions in CN Exchangeable Share Provisions.................. 17
7.3. Unanimous Approval of Directors.................................. 17
7.4. Schedules........................................................ 17
7.5. Headings and Table of Contents................................... 17
7.6. Gender and Number................................................ 17
7.7. Invalidity of Provisions......................................... 17
7.8. Waiver........................................................... 18
7.9. Governing Law.................................................... 18
7.10. Remedies......................................................... 18
7.11. Notices.......................................................... 18
</TABLE>
SCHEDULE A - Articles of Arrangement of CN/Restated Certificate
of Incorporation of Newco
SCHEDULE B - By-laws of each Corporation
<PAGE>
CO-OPERATION AGREEMENT
----------------------
THIS AGREEMENT is made [as of] the . day of ., 200.
B E T W E E N:
NORTH AMERICAN RAILWAYS, INC., a corporation incorporated under
the laws of the State of Delaware
("Newco")
-and-
[NAR HOLDINGS COMPANY], an unlimited liability company
incorporated under the laws of the Province of Nova Scotia
("NAR Subco")
-and-
CANADIAN NATIONAL RAILWAY COMPANY, a corporation incorporated
under the laws of Canada
("CN")
RECITALS:
A. Newco and CN have agreed to enter into this Co-operation Agreement to
ensure that, so far as possible, Newco and CN operate together as a single
economic enterprise and the shareholders of Newco and CN are provided with
equivalent economic returns;
B. This Co-operation Agreement will govern the future operations and
relationships of Newco and CN and sets out the governing principles of the
enterprise;
NOW THEREFORE in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged by each of the
parties), the parties hereto agree as follows:
<PAGE>
-2-
ARTICLE 1.
GOVERNANCE OF THE CORPORATIONS
1.1. Core Principles
---------------
Each of Newco and CN agree that the Corporations shall be governed
in a manner that gives full effect to the following principles (the "Core
Principles"):
1.1.1. Newco and CN shall each maintain its separate corporate existence
but shall operate together as a single economic enterprise, and shall be
managed on a unified basis for the benefit of the public shareholders of
the two Corporations as a combined group;
1.1.2. Members of the boards of directors and the Chief Executive Officer
of Newco and CN will be identical and other members of senior management
will be selected to allow the Corporations to be managed on a unified
basis;
1.1.3. Participating shares and voting shares of the Corporations, other
than the CN Special Limited Voting Shares and the CN Non-voting Equity
Shares, will be issued, traded and transferred together in the form of
Trading Units, with the consequence that all holders of such shares (a)
will benefit identically when dividends are declared or other distributions
are made by either Corporation or on liquidation of either Corporation, and
(b) will have the right to vote or to direct votes in each Corporation; and
1.1.4. Newco shall comply with the provisions of the CN Commercialization
Act as to the restriction on ownership of shares and the location of its
head office and shall adopt the principles of the Official Languages Act
(Canada) as provided herein.
1.2. Identicality of the Boards
--------------------------
Each Corporation will do all acts and things necessary and within
their respective powers to ensure that the board of directors of Newco and the
board of directors of CN comprise the same individuals (the "Identicality
Provision"). To that end, the Restated Certificate of Incorporation of Newco
shall provide that, subject to the amendment provisions contained therein, in
order to be qualified to be a member of the Newco board, an individual must be a
member of the CN board (the "Qualification Provision").
1.3. Governance
----------
In order that the Corporations shall be governed in accordance with
the Core Principles:
1.3.1. Future Election of Directors and Directors' Meetings. The
Corporations shall call and hold meetings of their respective shareholders
to elect directors as close as possible in time, and shall cause to be
nominated and proposed as management nominees the same slate of people to
be elected as directors of each Corporation. Prior to each meeting of
<PAGE>
-3-
shareholders at which directors are to be elected, the nominating committee
of each board will select and propose for approval by the boards of
directors a common slate; provided that the slate shall be composed so as
to comply with the requirements as to qualification and residency of
directors contained in the incorporating legislation of both Corporations.
Prior to any election or appointment of directors to be made by the boards
of directors, including without limitation any appointment of a director to
fill a vacancy on the boards, the nominating committee of each board will
select and propose for election or appointment by the boards of directors,
and the boards of directors shall elect or appoint, the same individual or
individuals to each board, subject to compliance with the requirements as
to qualification and residency of directors contained in the incorporating
legislation of both Corporations.
1.3.2. Charter Documents. The Restated Certificate of Incorporation of
Newco shall be in the form attached as Exhibit H to the Combination
Agreement and the articles of arrangement of CN shall be in the form
attached hereto as Schedule A, and each shall contain:
1.3.2.1. provisions imposing constraints on the issue, transfer and
ownership, including joint ownership, of voting shares of the
Corporation to prevent any one person, together with associates of
that person, from holding, beneficially owning or controlling,
directly or indirectly, otherwise than by way of security only, in the
aggregate, voting shares to which are attached more than fifteen
percent of the votes that may ordinarily be cast to elect directors of
the Corporation;
1.3.2.2. provisions respecting the enforcement of the constraints
imposed pursuant to section 1.3.2.1; and
1.3.2.3. provisions specifying that the head office of the
Corporation is to be situated in the Montreal Urban Community, Quebec;
in a manner that complies with and is subject to the exceptions contained
in the CN Commercialization Act, and such provisions may only be amended as
provided in the Restated Certificate of Incorporation of Newco and the
articles of incorporation of CN.
1.3.3. By-Laws. The by-laws of each Corporation shall be in the form
attached hereto as Schedule B. The board of directors of each Corporation
may propose or make an amendment to its by-laws with respect to a matter
which is treated in a similar manner in the by-laws of the other
Corporation only if (a) a corresponding amendment is proposed or made to
the by-laws of the other Corporation, or (b) such amendment is required to
be made by law.
1.3.4. Chair. The initial Chair of the board of directors of both
Corporations shall be Robert D. Krebs, if he is willing and able to serve
in that capacity. On an ongoing basis, the boards of directors of the
Corporations shall agree on one person to be appointed as Chair of both
boards of directors.
<PAGE>
-4-
1.3.5. Board Committees. The board of directors of Newco and CN will
establish identical committees of the board, including (without limitation)
a nominating committee, audit committee and compensation committee. The
members of the corresponding committees of the Corporations will be
identical. Such number of the members of any such committees as may be
required by the CBCA from time to time to be resident Canadians shall be
resident Canadians.
1.3.6. Chief Executive Officer. The initial Chief Executive Officer of
both Corporations shall be Paul M. Tellier, if he is willing and able to
serve in that capacity. On an ongoing basis, the boards of directors of the
Corporations shall agree on one person to be appointed as the Chief
Executive Officer of both Corporations.
1.3.7. Management. Each Corporation will do, and agrees to cause each of
its subsidiaries to do, all acts and things that may be necessary and
desirable to ensure that the businesses of Newco and CN are managed on a
unified basis for the benefit of the shareholders of the two Corporations
as a combined group, including the appointment of common management at the
senior executive level for both Corporations.
1.3.8. Inter-Corporate Transactions. In consequence of the Core Principle
that the Corporations should be operated as a single economic enterprise,
no special board committee review, minority shareholder approval or other
similar procedures for the protection of minority shareholders shall be
required for transactions between Newco and its subsidiaries on the one
hand and CN and its subsidiaries on the other. Notwithstanding any other
provision of this Agreement, to the extent required by applicable tax law,
in any agreement, arrangement, dealing or transaction (a "Transaction")
involving Newco (or a subsidiary of Newco) and CN (or a subsidiary of CN),
the parties thereto shall agree to the amount and nature of any
consideration to be paid by one to the other and to terms and conditions of
the Transaction on the same basis as they would have agreed if they were
dealing with each other at arm's length.
1.3.9. English and French Language. Newco adopts the principles of
Canadian bilingualism applicable to services provided by federal
institutions as reflected in Parts IV and V of the Official Languages Act
(Canada) and will endeavour to implement those principles in the offering
of its services and the operation of its facilities in Canada.
ARTICLE 2.
SHAREHOLDER MATTERS
-------------------
2.1. Place of Shareholder Meetings
-----------------------------
Meetings of shareholders of the Corporations shall be held as close
as possible in time and at the same location, and shall be held at the
registered office of CN or at such other place within Canada as the directors of
Newco and CN may determine.
<PAGE>
-5-
2.2. Record Date
-----------
For all meetings of shareholders of the Corporations, the directors
may fix in advance a date as the record date for the purpose of determining
shareholders entitled to receive notice of the meetings of shareholders which,
in any case where the directors so fix a record date, shall be the same record
date for each Corporation. The directors shall not fail to fix a record date
for a meeting of shareholders if the effect under the incorporating legislation
of the Corporations would be to default to different record dates for the
meetings of shareholders of each Corporation.
2.3. Rights of Dissent
-----------------
If dissent rights are granted to shareholders of one of the
Corporations by the incorporating legislation of the Corporation or otherwise in
connection with the proposed approval of any matter by shareholders, the board
of directors of the other Corporation shall ensure that shareholders of that
Corporation are granted equivalent dissent rights.
2.4. CN Special Limited Voting Shares
--------------------------------
The Corporations and NAR Subco agree that the voting rights
attaching to the CN Special Limited Voting Shares shall be voted in a manner
that is consistent with the Core Principles.
ARTICLE 3.
COVENANTS RELATING TO DIVIDENDS AND OTHER MATTERS
-------------------------------------------------
3.1. Dividends
---------
3.1.1. Subject to the articles of incorporation of CN, neither Corporation
shall declare or pay any cash or stock dividends or make any distributions
on shares comprising Trading Units unless the other Corporation shall
simultaneously declare or pay, as the case may be, an identical or
corresponding cash or stock dividend or distribution per share on the
shares comprising the other Trading Units, except that (a) CN may elect to
pay dividends in Canadian dollars in accordance with the CN Exchangeable
Share Provisions, and Newco may elect to pay dividends in U.S. dollars, and
(b) either Corporation may, in lieu of declaring a corresponding stock
dividend, effect a corresponding subdivision of the CN Exchangeable Shares,
CN Voting Shares and/or the Newco Common Shares, as the case may be.
3.1.2. Each Corporation will take all such actions and do all such things
as are reasonably necessary, in co-operation with the other Corporation, to
ensure that (i) the respective declaration date, record date and payment
date for a dividend or distribution (or stock subdivision in lieu of a
stock dividend) on its shares shall be the same as the
<PAGE>
-6-
declaration date, record date and payment date for a corresponding dividend
or distribution (or stock subdivision in lieu of a stock dividend) on the
other Corporation's shares.
3.1.3. If the boards of directors of the Corporations determine that a
payment from one Corporation to the other is necessary or appropriate in
connection with the payment of a dividend or the making of a distribution
by the other Corporation, the relevant Corporation shall make an equalizing
payment to the other Corporation sufficient to permit the other Corporation
to pay the equivalent dividend or make the equivalent distribution.
3.2. Other Covenants
---------------
3.2.1. Newco will take all such actions and do all such things as are
reasonably necessary or desirable to enable and permit CN, in accordance
with applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount or the Retraction
Price in respect of each issued and outstanding CN Exchangeable Share upon
the liquidation, dissolution or winding-up of CN or the delivery of a
Retraction Request by a holder of CN Exchangeable Shares, as the case may
be, including without limitation all such actions and all such things as
are necessary or desirable to enable and permit CN to cause to be delivered
Newco Common Shares to the holders of CN Exchangeable Shares in accordance
with the provisions of Article 5 or 6, as the case may be, of the CN
Exchangeable Share Provisions;
3.2.2. Newco will take all such actions and do all such things as are
reasonably necessary or desirable to enable and permit NAR Subco, in
accordance with applicable law, to perform NAR Subco's obligations arising
upon the exercise by it of the Liquidation Call Right or the Retraction
Call Right, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit NAR Subco to
cause Newco Common Shares to be issued to the holders of CN Exchangeable
Shares in accordance with the provisions of the Liquidation Call Right or
the Retraction Call Right, as the case may be; and
3.2.3. Neither Corporation shall initiate, propose or seek a voluntary
liquidation, dissolution or winding up of the other Corporation unless it
proposes to effect a substantially contemporaneous voluntary liquidation,
dissolution or winding up of itself.
3.2.4. If Newco becomes a "specified financial institution" (as such term
is defined in the Income Tax Act (Canada)) or does not deal at arm's length
with such a person, NAR Subco will exercise the Retraction Call Right if
requested to do so by a holder of CN Exchangeable Shares making a
Retraction Request who either alone or together with "specified persons"
(as such term is defined in paragraph (h) of the definition of "taxable
preferred share" in a subsection 248(l) of the Income Tax Act (Canada))
receives dividends in respect of more than 10% of the CN Exchangeable
Shares.
<PAGE>
-7-
3.3. Reservation of Newco Common Shares
----------------------------------
Newco hereby represents, warrants and covenants in favour of CN
that Newco has reserved for issuance and will, at all times while any CN
Exchangeable Shares (other than CN Exchangeable Shares held by Newco or its
Affiliates) are outstanding, keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of Newco
Common Shares (or other shares or securities into which Newco Common Shares may
be reclassified or changed as contemplated by section 4.1 hereof) (a) as is
equal to the sum of (i) the number of CN Exchangeable Shares issued and
outstanding from time to time and (ii) the number of CN Exchangeable Shares
issuable upon the exercise of all rights to acquire CN Exchangeable Shares
outstanding from time to time and (b) as are now and may hereafter be required
to enable and permit Newco to meet its obligations under the Voting and Exchange
Trust Agreement and under any other security or commitment pursuant to which
Newco may now or hereafter be required to issue Newco Common Shares, to enable
and permit NAR Subco to meet its obligations under each of the Liquidation Call
Right and the Retraction Call Right, and to enable and permit CN to meet its
obligations hereunder and under the CN Exchangeable Share Provisions.
3.4. Reservation of CN Voting Shares
-------------------------------
CN hereby represents, warrants and covenants in favour of Newco
that it will at all times keep available for issuance, free from pre-emptive and
other rights, an unlimited number of CN Voting Shares to permit all future
issuances and sales of Trading Units to include a CN Voting Share.
3.5. Notification of Certain Events
------------------------------
In order to assist Newco to comply with its obligations hereunder
and to permit NAR Subco to exercise the Liquidation Call Right and the
Retraction Call Right, CN will notify Newco and NAR Subco of each of the
following events at the time as set forth below:
3.5.1. in the event of any determination by the board of directors of CN
to institute voluntary liquidation, dissolution or winding-up proceedings
with respect to CN or to effect any other distribution of the assets of CN
among its shareholders for the purpose of winding up its affairs, at least
60 days prior to the proposed effective date of such liquidation,
dissolution, winding-u p or other distribution;
3.5.2. as soon as practicable, upon the earlier of receipt by CN of notice
of and CN otherwise becoming aware of any threatened or instituted claim,
suit, petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of CN or to effect any other
distribution of the assets of CN among its shareholders for the purpose of
winding up its affairs, in each case where CN has failed to contest in good
faith any such proceeding commenced in respect of CN within 30 days of
becoming aware thereof;
<PAGE>
-8-
3.5.3. immediately, upon receipt by CN of a Retraction Request; and
3.5.4. as soon as practicable upon the issuance by CN of any CN
Exchangeable Shares or rights to acquire CN Exchangeable Shares.
3.6. Issuance of Newco Common Shares to CN
-------------------------------------
In furtherance of its obligations under sections 3.2.1 and 3.2.2
hereof, upon notice from CN or NAR Subco of any event that requires CN or NAR
Subco to cause Newco Common Shares to be issued to any holder of CN Exchangeable
Shares, Newco shall forthwith issue and, jointly with CN, cause to be delivered
the requisite number of Trading Units representing Newco Common Shares to be
received by, and issued to or to the order of, the former holder of the
surrendered CN Exchangeable Shares, as CN or NAR Subco shall direct. All such
Newco Common Shares shall be duly authorized and validly issued as fully paid
and non-assessable and shall be free and clear of any lien, claim or
encumbrance.
3.7. Qualification of Trading Units
------------------------------
If any shares comprising the Trading Units to be issued and
delivered hereunder require registration or qualification with or approval of or
the filing of any document, including any prospectus or similar document or the
taking of any proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian or United
States federal, provincial or state securities or other law or regulation or
pursuant to the rules and regulations of any securities or other regulatory
authority or the fulfilment of any other United States or Canadian legal
requirement before the shares comprising such Trading Units may be issued by
Newco and/or CN and the certificates representing such shares delivered to the
holder of surrendered certificates representing CN Exchangeable Shares or in
order that the shares comprising the Trading Units may be freely traded
thereafter, Newco and CN will in good faith expeditiously take all such actions
and do all such things as are necessary or desirable to cause the shares
comprising the Trading Units to be and remain duly registered, qualified or
approved under United States and/or Canadian law, as the case may be. Newco and
CN will in good faith expeditiously take all such actions and do all such things
as are reasonably necessary or desirable to cause all shares comprising the
Trading Units to be delivered hereunder to be listed, quoted or posted for
trading on all stock exchanges and quotation systems on which outstanding shares
comprising the Trading Units have been listed by Newco and CN and remain listed
and are quoted or posted for trading at such time.
<PAGE>
-9-
ARTICLE 4.
SHARE CAPITAL
-------------
4.1. Distributions on Newco Common Shares
------------------------------------
Newco will not without the prior approval of CN and the prior
approval of the holders of the CN Exchangeable Shares given in accordance with
of the CN Exchangeable Share Provisions:
4.1.1. issue or distribute Newco Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire Newco Common Shares)
to the holders of all or substantially all of the then outstanding Newco
Common Shares by way of stock dividend or other distribution, other than an
issue of Newco Common Shares to holders of Newco Common Shares who exercise
an option to receive dividends in Newco Common Shares represented by
Trading Units in lieu of receiving cash dividends;
4.1.2. issue or distribute rights, options or warrants to holders of all
or substantially all of the then outstanding Newco Common Shares entitling
them to subscribe for or to purchase Newco Common Shares and CN Voting
Shares represented by Trading Units; or
4.1.3. issue or distribute to the holders of all or substantially all of
the then outstanding Newco Common Shares:
A. shares or securities of Newco of any class other than Newco Common
Shares;
B. rights, options or warrants other than those referred to in
section 4.1.2 above;
C. evidences of indebtedness of Newco; or
D. assets of Newco,
unless, in the case of sections 4.1.1 and 4.1.2 above a corresponding issue or
distribution of Trading Units comprised of CN Exchangeable Shares and CN Voting
Shares or rights, options or warrants to acquire Trading Units comprised of CN
Exchangeable Shares and CN Voting Shares, as applicable, is made or, in the case
of section 4.1.3, the economic equivalent on a per share basis of such other
shares or securities, rights, options, warrants, evidences of indebtedness or
other assets is issued or distributed simultaneously to holders of the CN
Exchangeable Shares or unless, in the case of a stock dividend payable in Newco
Common Shares represented by Trading Units, in lieu of such stock dividend CN
effects a corresponding subdivision of the outstanding CN Exchangeable Shares
and CN Voting Shares.
<PAGE>
-10-
4.2. Subdivisions, Consolidations and Reclassifications of Newco
-----------------------------------------------------------
Common Shares
-------------
Newco will not without the prior approval of CN and the prior
approval of the holders of the CN Exchangeable Shares given in accordance with
the CN Exchangeable Shares Provisions:
4.2.1. subdivide, redivide or change the then outstanding Newco Common
Shares into a greater number of Newco Common Shares;
4.2.2. reduce, combine, consolidate or change the then outstanding Newco
Common Shares into a lesser number of Newco Common Shares; or
4.2.3. reclassify or otherwise change the Newco Common Shares or effect an
amalgamation, merger, reorganization or other transaction affecting the
Newco Common Shares,
unless the same, in the case of sections 4.2.1 and 4.2.2 above or, in the case
of section 4.1.3 above, the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the CN
Exchangeable Shares and the CN Voting Shares.
4.3. Changes to CN Voting Shares and CN Exchangeable Shares
------------------------------------------------------
CN shall not:
A. subdivide, redivide or change the then outstanding CN Exchangeable
Shares into a greater number of CN Exchangeable Shares; or
B. reduce, combine, consolidate or change the then outstanding CN
Exchangeable Shares into a lesser number of CN Exchangeable Shares;
unless the same change shall simultaneously be made to the CN Voting Shares.
4.4. Distributions on CN Exchangeable Shares
----------------------------------------
CN will not without the prior approval of Newco and the prior
approval by the holders of a majority of the Newco Common Shares casting a vote,
assuming a quorum is present:
4.4.1. issue or distribute CN Exchangeable Shares (or securities
exchangeable for or convertible into or carrying rights to acquire CN
Exchangeable Shares) to the holders of all or substantially all of the then
outstanding CN Exchangeable Shares by way of stock dividend or other
distribution, other than an issue of CN Exchangeable Shares to holders of
CN Exchangeable Shares who exercise an option to receive dividends in CN
Exchangeable Shares and CN Voting Shares represented by Trading Units in
lieu of receiving cash dividends;
<PAGE>
-11-
4.4.2. issue or distribute rights, options or warrants to the holders of all
or substantially all of the then outstanding CN Exchangeable Shares entitling
them to subscribe for or to purchase CN Exchangeable Shares and CN Voting
Shares represented by Trading Units;
4.4.3. issue or distribute to the holders of all or substantially all of
the then outstanding CN Exchangeable Shares:
A. shares or securities of CN of any class other than CN
Exchangeable Shares;
B. rights, options or warrants other than those referred to in
section 4.4.2;
C. evidences of indebtedness of CN; or
D. assets of CN,
unless, in the case of sections 4.4.1 and 4.4.2 above a corresponding issue or
distribution of Trading Units comprised of Newco Common Shares and CN Voting
Shares or rights, options or warrants to acquire Trading Units comprised of
Newco Common Shares and CN Voting Shares, as applicable, is made or, in the case
of Section 4.4.3, the economic equivalent on a per share basis of such other
shares or securities, rights, options, warrants, evidences of indebtedness or
other assets is issued or distributed simultaneously to holders of the Newco
Common Shares or unless, in the case of a stock dividend payable in CN
Exchangeable Shares represented by Trading Units, in lieu of such stock dividend
Newco and CN effect a corresponding subdivision of the outstanding Newco Common
Shares and CN Voting Shares, respectively.
4.5. Subdivisions, Consolidations and Reclassifications of CN Exchangeable
---------------------------------------------------------------------
Shares
------
CN will not without the prior approval of Newco and the prior
approval by the holders of a majority of the Newco Common Shares casting a vote,
assuming a quorum is present:
4.5.1. subdivide, redivide or change the then outstanding CN Exchangeable
Shares into a greater number of CN Exchangeable Shares;
4.5.2. reduce, combine, consolidate or change the then outstanding CN
Exchangeable Shares into a lesser number of CN Exchangeable Shares; or
4.5.3. reclassify or otherwise change the CN Exchangeable Shares or effect
an amalgamation, merger, reorganization or other transaction affecting the CN
Exchangeable Shares,
<PAGE>
-12-
unless the same, in the case of sections 4.5.1 and 4.5.2 above or, in the case
of section 4.5.3 above, the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the Newco Common
Shares and the CN Voting Shares.
4.6. Economic Equivalence
--------------------
The boards of directors of the Corporations shall determine, in good
faith and in their sole discretion, economic equivalence for the purposes of
sections 4.1, 4.2, 4.4 and 4.5, and each such determination shall be binding on
the Corporations and their shareholders. In making each such determination, the
boards of directors of the Corporations may consider the factors set out in
section 3.5 of the CN Exchangeable Share Provisions.
4.7. Issuance of Shares
------------------
4.7.1 Newco will issue Newco Common Shares only (i) upon exchange of CN
Exchangeable Shares or (ii) if CN issues CN Voting Shares and the directors
of the Corporations are satisfied that all appropriate measures have been
taken to ensure that the Newco Common Shares and CN Voting Shares trade as a
unit.
4.7.2 CN will issue CN Exchangeable Shares only where it also issues CN
Voting Shares and the directors of the Corporations are satisfied that all
appropriate measures have been taken to ensure the CN Exchangeable Shares and
CN Voting Shares trade as a unit.
4.7.3 Newco will agree to maintain its Golden Share outstanding in
accordance with the Voting and Exchange Trust Agreement.
4.7.4 Only Trading Units will be issued by the Corporations as
consideration for any acquisition by the Corporations where equity is to be
issued as consideration in the acquisition.
4.8. Other Equity Issuances
----------------------
Neither Newco nor CN will issue any participating shares or voting
shares except in accordance with Section 4.7. Either Corporation may issue non-
participating, non-voting shares, provided that the directors of both
Corporations are satisfied that such issuance is consistent with the Core
Principles.
4.9. Tender Offers
-------------
In the event that a tender offer, take-over bid, share exchange
offer, share exchange bid, or similar transaction with respect to either
Corporation (an "Offer") is proposed to the Corporation or its shareholders, the
Corporation will use its reasonable efforts expeditiously and in good faith to
take all such actions and do all such things as are necessary or desirable to
enable and permit holders of the shares represented by Trading Units of the
other Corporation to participate in such Offer to the same extent and on an
economically equivalent basis as the
<PAGE>
-13-
holders of the shares of the Corporation, without discrimination. Without
limiting the generality of the foregoing, Newco will use its reasonable efforts
expeditiously and in good faith to ensure that holders of CN Exchangeable Shares
may participate in all such Offers without being required to retract
Exchangeable Shares (or, if so required, to ensure that any such retraction
shall be effective only upon, and shall be conditional upon, the closing of the
Offer and only to the extent necessary to tender or deposit to the Offer).
4.10. Self-Tenders
------------
Neither Corporation shall make a self-tender offer or issuer bid (a
"Self-Tender Offer") for its outstanding Trading Units (or for any of its shares
included in such Trading Units) unless a substantially contemporaneous Self-
Tender Offer for an equivalent percentage of the outstanding Trading Units of
the other Corporation is made on the same or corresponding terms; provided that
CN shall be entitled to offer to pay any cash consideration payable thereunder
in Canadian dollars and Newco shall be entitled to offer to pay any cash
consideration payable thereunder in U.S. dollars. In connection with any such
Self Tender Offers, the Corporations agree to make all commercially reasonable
efforts, including by seeking discretionary relief from applicable securities
regulatory authorities, to permit any pro-rationing of acceptances of such Self-
Tender Offers to occur on a basis which treats both Self-Tender Offers as a
single offer being made for a single class of securities.
4.11. No Transfer of CN Special Limited Voting Shares or CN Non-voting
----------------------------------------------------------------
Equity Shares
-------------
Newco and NAR Subco will not, and Newco will ensure that NAR Subco
does not, sell, pledge, encumber or otherwise deal in the CN Special Limited
Voting Shares or the CN Non-voting Equity Shares, except that Newco and NAR
Subco shall be permitted to transfer the CN Special Limited Voting Shares and
the CN Non-voting Equity Shares to a wholly owned direct or indirect subsidiary
of Newco or to another entity controlled and wholly owned, directly or
indirectly, by Newco.
ARTICLE 5.
FINANCIAL STATEMENTS AND STOCK EXCHANGE LISTINGS
5.1. Fiscal Year
-----------
The fiscal year of the Corporations shall terminate on the last day
of December in each year or such other date as the Corporations may from time to
time determine. The Corporations shall maintain the same fiscal year end.
5.2. Auditors
--------
Unless and until the shareholders of the Corporation decide
otherwise, the auditors of each Corporation shall be the same international
accounting firm.
<PAGE>
-14-
5.3. Financial Statements
--------------------
The Corporations will cooperate to produce consolidated financial
statements for distribution to shareholders and regulators. These financial
statements will be prepared in accordance with U.S. GAAP. Each Corporation will
also produce standalone financial statements for its debtholders if so required
under the terms of such indebtedness and, in CN's case, for its shareholders.
Newco's financial statements will be prepared in accordance with U.S. GAAP, and
CN's financial statements will be prepared in accordance with Canadian GAAP and
U.S. GAAP. Whether or not required by the incorporating legislation of the
Corporations, the consolidated financial statements shall be placed before the
shareholders of both Corporations at each annual meeting of shareholders.
5.4. Stock Exchange Listings and Public Documents
--------------------------------------------
5.4.1. The Corporations will use their best efforts to maintain the listing
of the Newco Common Shares and CN Voting Shares represented by Trading Units
and the CN Exchangeable Shares and the CN Voting Shares represented by
Trading Units on the New York Stock Exchange and The Toronto Stock Exchange,
respectively.
5.4.2. Subject to section 5.3, to the extent practicable, the Corporations
will prepare joint annual reports, proxy circulars and other similar
documents to be sent to shareholders or filed with regulatory authorities.
5.4.3. Each Corporation will, and so far as it is able will ensure that each
of its subsidiaries will, ensure that the other is in a position to comply
with obligations imposed on it by all stock exchanges on which either or both
of their securities are from time to time listed, quoted or traded and all
securities regulatory authorities having jurisdiction over either
Corporation. In particular, each Corporation will provide to the other
Corporation all information reasonably required by the other Corporation for
the purpose of making any press release, report of material change or other
filing required by a stock exchange or securities regulatory authority and
will use all reasonable endeavours to ensure, as far as practicable, that the
Corporations co-ordinate the content and timing of release of announcements.
5.4.4. The parties will co-operate with each other from time to time to
ensure that all information necessary or desirable for the making of (or
responding to any requests for further information consequent upon) any
notifications or filings made in respect of this Agreement, or the
transactions contemplated hereunder, is supplied to the party dealing with
such notification and filings and that they are properly, accurately and
promptly made.
<PAGE>
-15-
ARTICLE 6.
AMENDMENT AND TERMINATION
6.1. Amendment
---------
6.1.1 The boards of directors of the Corporations may make any amendments
to this Agreement which are formal or technical in nature or which are not
prejudicial to the rights or interests of the shareholders of either
Corporation or are necessary to correct any inconsistency or manifest errors.
6.1.2 Articles 3 and 4 of this Agreement may not be amended in a manner
which is prejudicial to the rights or interests of: (a) the holders of the CN
Exchangeable Shares unless such amendment is approved by such holders in
accordance with the CN Exchangeable Share Provisions; or (b) the holders of
the Newco Common Shares unless such amendment is approved by the holders of a
majority of such shares casting a vote, assuming a quorum is present.
6.1.3 Subject to section 6.1.2, the boards of directors of the
Corporations, by unanimous decision, may amend this Agreement and may take an
action or approve a matter, step or undertaking that departs from any of the
provisions of this Agreement, provided they have first determined that the
amendment or departure is: (i) in the best interests of the Corporations
considered as a single economic enterprise; (ii) permissible under applicable
law; and (iii) consistent with the Core Principles.
6.1.4 Any amendment to this Agreement, other than amendments described in
sections 6.1.1, 6.1.2 and 6.1.3, but including, without limitation, any
amendment to section 4.11, may only be made with the unanimous approval of
the board of directors of each Corporation and by the affirmative vote of not
less than 85% of the votes cast at a meeting of shareholders of each
Corporation at which a quorum is present, provided that such number of
affirmative votes constitutes at least a majority of the votes entitled to be
cast on such amendment by holders of each Corporation's shares.
6.2. Termination
-----------
This Agreement may be terminated only if such termination is approved
by the directors and shareholders of both Corporations in the manner provided in
Section 6.1.4.
<PAGE>
-16-
ARTICLE 7.
INTERPRETATION AND GENERAL PROVISIONS
7.1. Definitions
-----------
In this Agreement,
7.1.1. "Agreement" means this agreement and all schedules, if any, attached
to this agreement, in each case as they may be supplemented or amended from
time to time, and the expressions "hereof", "herein", "hereto", "hereunder",
"hereby" and similar expressions refer to this agreement, and unless
otherwise indicated, references to Articles and sections are to Articles and
sections in this agreement;
7.1.2. "Canadian GAAP" means for all principles stated in the Handbook of
the Canadian Institute of Chartered Accountants, such principles so stated;
7.1.3. "Combination Agreement" means the amended and restated agreement
dated December 18, 1999 among CN, Western, Newco and Merger Sub to effect the
combination of the businesses of CN and Western;
7.1.4. "Core Principles" has the meaning attributed to such term in section
1.1;
7.1.5. "Corporations" means both Newco and CN and "Corporation" means
either Newco or CN;
7.1.6. "Golden Share" means the special voting share in the capital of
Newco, which will be voted in accordance with the Voting and Exchange Trust
Agreement;
7.1.7. "Identicality Provision" has the meaning attributed to such term in
section 1.2;
7.1.8. "CN Commercialization Act" means the CN Commercialization Act, S.C.
1995, c. 24;
7.1.9. "CN Exchangeable Share Provisions" means the attributes of the CN
Exchangeable Shares as set out in the articles of arrangement of CN;
7.1.10. "Offer" has the meaning attributed to such term in section 4.9;
7.1.11. "Qualification Provision" has the meaning attributed to such term in
section 1.2;
7.1.12. "Trading Unit" means (i) a unit consisting of a Newco Common Share
and a CN Voting Share, which shall be required by the constating documents of
each Corporation to be traded together; or (ii) a unit consisting of a CN
Exchangeable Share and a CN Voting Share, which shall be required by the
constating documents of CN to be traded together; for greater certainty,
Trading Units are not securities independent of the shares they represent.
<PAGE>
-17-
7.1.13. "Transaction" has the meaning attributed to such term in section
1.3.8;
7.1.13. "U.S. GAAP" means United States generally accepted accounting
principles; and
7.1.14. "Western" means Western, a corporation incorporated under the laws
of the State of Delaware.
7.2. Definitions in CN Exchangeable Share Provisions
-----------------------------------------------
Capitalized terms used herein and not otherwise defined herein shall
have the meaning attributed thereto in the CN Exchangeable Share Provisions.
7.3. Unanimous Approval of Directors
-------------------------------
References in this Agreement to the unanimous approval or unanimous
decision of the board of directors of a Corporation of a particular matter shall
mean the approval of the matter in question by the affirmative vote of all of
the directors of the Corporation, other than any directors who are unable to
participate in the board of directors' deliberation due to medical reasons.
7.4. Schedules
---------
The following are the schedules attached to this Agreement:
Schedule A - Articles of Arrangement of CN/Restated
Certificate of Incorporation of Newco
Schedule B - By-Laws of each Corporation
7.5. Headings and Table of Contents
------------------------------
The inclusion of headings and a table of contents in this Agreement
are for convenience of reference only and shall not affect the construction or
interpretation hereof.
7.6. Gender and Number
-----------------
In this Agreement, unless the context otherwise requires, words
importing the singular include the plural and vice versa and words importing
gender include all genders.
7.7. Invalidity of Provisions
------------------------
Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
<PAGE>
-18-
7.8. Waiver
------
Except as expressly provided in this Agreement, no waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any provision of this Agreement shall constitute a waiver
of any other provision nor shall any waiver of any provision of this Agreement
constitute a continuing waiver unless otherwise expressly provided. Any waiver
of compliance in any material respect of the covenants contained in Articles 3
and 4 shall be deemed to be an amendment subject to the requirement of Article
6.
7.9. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Quebec and the federal laws of Canada applicable
therein.
7.10. Remedies
--------
Each Corporation acknowledges that a breach or threatened breach by
it of any provision of this Agreement will result in the other Corporation
suffering irreparable harm which cannot be calculated or fully or adequately
compensated by recovery of damages alone. Accordingly, the other Corporation is
entitled to equitable relief, including interim or permanent injunctive relief,
specific performance, or other equitable remedies in the event of any breach of
the provisions of this Agreement, in addition to all other remedies available to
that Corporation.
7.11. Notices
-------
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be given by facsimile or other means of
electronic communication or delivered by hand. Any such notice or other
communication, if sent by facsimile or other means of electronic communication,
shall be deemed to have been received on the Business Day following the sending,
or if delivered by hand shall be deemed to have been received at the time it is
delivered to the applicable address noted below either to the individual
designated below or to an individual at such address having apparent authority
to accept deliveries on behalf of the addressee. Notice of change of address
shall also be governed by this section. Notices and other communications shall
be addressed as follows:
A. if to Newco or NAR Subco:
North American Railways, Inc.
. (ADDRESS
Telecopier number: (.) .
<PAGE>
-19-
B. if to CN:
Canadian National Railway Company
. (ADDRESS)
Telecopier number: (.) .
The failure to send or deliver a copy of a notice or other
communication to any legal counsel shall not invalidate any notice given under
this section.
IN WITNESS WHEREOF the parties have executed this Agreement.
NORTH AMERICAN RAILWAYS, INC.
By:_____________________________________
CANADIAN NATIONAL RAILWAY COMPANY
By:_____________________________________
[NAR HOLDINGS COMPANY]
By:_____________________________________
________________________________________
<PAGE>
Exhibit "E"
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions.
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
"Arrangement" means the arrangement under section 192 of the CBCA on the terms
and subject to the conditions set out in this Plan of Arrangement, subject to
any amendments or variations thereto made in accordance with Article 6 or
section 10.1 of the Combination Agreement or made at the direction of the Court
in the Final Order.
"Arrangement Effective Date" means the date shown on the Certificate.
"Arrangement Effective Time" means [9:01 a.m.] on the Arrangement Effective Date
[NTD: to be immediately following the Merger Effective Time as provided for in
the Combination Agreement].
"Arrangement Resolution" means the special resolution passed by the holders of
the CN Common Shares and the holders of the CN Options, voting together as a
single class at the CN Shareholders Meeting.
"Articles of Arrangement" means the articles of arrangement of CN in respect of
the Arrangement, required by the CBCA to be sent to the Director after the Final
Order is entered.
"Automatic Exchange Rights" has the meaning ascribed thereto in the Voting and
Exchange Trust Agreement.
"BNSF" means Burlington Northern Santa Fe Corporation, a corporation existing
under the laws of the State of Delaware.
"Business Day" means any day on which commercial banks are generally open for
business in New York, New York and Montreal, Quebec, other than a Saturday, a
Sunday or a day observed as a holiday in Montreal, Quebec under the laws of the
Province of Quebec or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
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"CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44.
"CN" means Canadian National Railway Company, a corporation existing under the
laws of Canada.
"CN Common Shares" means the outstanding common shares in the capital of CN.
"CN Exchangeable Share" means a share in the class of non-voting exchangeable
preferred shares in the capital of CN, the holders of which are the
beneficiaries of certain voting rights in respect of the Special Voting Share
and certain other rights, all as set forth in the Voting and Exchange Trust
Agreement.
"CN Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the CN Exchangeable Shares, which rights,
privileges, restrictions and conditions shall be substantially as set forth in
Appendix II hereto.
"CN Non-voting Equity Share" means a share in the class of non-voting equity
shares in the capital of CN.
"CN Non-voting Equity Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the CN Non-voting Equity Shares, which
rights, privileges, restrictions and conditions shall be substantially as set
forth in Appendix IV hereto.
"CN Option" means a CN Common Share purchase option granted under one of the CN
Stock Option Plans, as amended, and being outstanding and unexercised on the
Arrangement Effective Date.
"CN Shareholders Meeting" means the special meeting of the holders of CN Common
Shares and the CN Options (including any adjournment thereof) that is to be
convened as provided by the Interim Order to consider, and if deemed advisable,
approve the Arrangement.
"CN Special Limited Voting Share" means a share in the class of limited voting
special shares in the capital of CN.
"CN Special Limited Voting Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the CN Special Limited Voting Shares,
which rights, privileges, restrictions and conditions shall be substantially as
set forth in Appendix III hereto.
"CN Stapled Unit" means a unit comprised of one CN Voting Share and one CN
Exchangeable Share, which unit does not constitute a security independent of the
shares it represents.
"CN Stock Option Plans" means CN's Management Stock Option Plan Effective as of
November 28, 1995, the Management Long-Term Incentive Plan Adopted May 7,
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1996, as amended and [NTD: specify individual employment contracts involving
options outside these plans].
"CN Voting Share" means a share in the class of voting shares in the capital of
CN.
"CN Voting Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the CN Voting Shares, which rights, privileges,
restrictions and conditions shall be substantially as set forth in Appendix I
hereto.
"Certificate" means the certificate of arrangement giving effect to the
Arrangement, issued pursuant to subsection 192(7) of the CBCA after the Articles
of Arrangement have been filed.
"Circular" means the notice of the CN Shareholders Meeting and accompanying
management information circular, including all schedules and exhibits thereto,
to be sent to holders of CN Common Shares in connection with the CN Shareholders
Meeting.
"Combination Agreement" means the agreement made as of December 18, 1999 among
CN, BNSF, Newco and Merger Sub (as defined therein), as amended, supplemented
and/or restated in accordance therewith prior to the Arrangement Effective Date,
providing for, among other things, the Arrangement.
"Commercialization Act" means the CN Commercialization Act, S.C. 1995, c.24.
"Court" means the Quebec Superior Court.
"Current Market Price" has the meaning ascribed thereto in the CN Exchangeable
Share Provisions.
"Depositary" means The Trust Company of the Bank of Montreal at its offices set
out in the Letter of Transmittal and Election Form.
"Director" means the Director appointed under section 260 of the CBCA.
"Dissent Procedures" has the meaning set out in section 3.1.
"Dissent Rights" has the meaning set out in section 3.1.
"Dissenting Shareholder" means a holder of CN Common Shares who dissents in
respect of the Arrangement in strict compliance with the Dissent Procedures.
"Dividend Amount" has the meaning ascribed thereto in section 5.1(a).
"Election Deadline" means the election deadline for the submission of letters of
transmittal and election forms specified in the Letter of Transmittal and
Election Form.
"Exchange Ratio" means 1.05.
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"Exchange Right" has the meaning ascribed thereto in the Voting and Exchange
Trust Agreement.
"Final Order" means the final order of the Court approving the Arrangement, as
such order may be amended by the Court at any time prior to the Arrangement
Effective Date or, if appealed, then unless such appeal is withdrawn or denied,
as affirmed.
"ITA" means the Income Tax Act (Canada).
"Interim Order" means the interim order of the Court, as the same may be
amended, made in connection with the process for obtaining shareholder approval
of the Arrangement and related matters.
"Letter of Transmittal and Election Form" means the Letter of Transmittal and
Election Form for use by holders of CN Common Shares to be sent to the holders
of CN Common Shares, other than Dissenting Shareholders, as described in the
Circular.
"Liquidation Call Purchase Price" has the meaning ascribed thereto in section
5.1(a).
"Liquidation Call Right" has the meaning ascribed thereto in section 5.1(a).
"Liquidation Date" has the meaning ascribed thereto in the CN Exchangeable Share
Provisions.
"Meeting Date" means the date of the CN Shareholders Meeting.
"Merger" means the merger of BNSF and a wholly-owned subsidiary of Newco
provided for in the Combination Agreement.
"NAR Subco" means [NAR Holdings Company], an unlimited liability company
existing under the laws of the Province of Nova Scotia and a wholly-owned
subsidiary of Newco.
"Newco" means North American Railways, Inc., a corporation existing under the
laws of the State of Delaware.
"Newco Common Share" means a share in the class of common stock, par value
U.S. $0.01 per share, of Newco.
"Newco Elected Exchangeable Share" means any CN Exchangeable Share that the
holder of the CN Common Share entitled to same under the Arrangement shall have
elected, in a duly completed Letter of Transmittal and Election Form deposited
with the Depositary no later than the Election Deadline, to transfer to NAR
Subco under the Arrangement for a Newco Common Share or that is deemed to be a
Newco Elected Exchangeable Share pursuant to section 2.3.
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"Newco Stapled Unit" means a unit comprised of one CN Voting Share and one Newco
Common Share, which unit does not constitute a security independent of the
shares it represents.
"NYSE" means the New York Stock Exchange.
"Person" includes any individual, firm, partnership, joint venture, venture
capital fund, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status.
"Replacement Option" has the meaning ascribed thereto in section 2.2(h).
"Retraction Request" has the meaning ascribed thereto in the CN Exchangeable
Share Provisions.
"Special Voting Share" means the share of special voting stock of Newco having
substantially the rights, privileges, restrictions and conditions described in
the Voting and Exchange Trust Agreement.
"Transfer Agent" has the meaning ascribed thereto in section 5.1(b).
"Trustee" means The Trust Company of the Bank of Montreal.
"TSE" means The Toronto Stock Exchange.
"Voting and Exchange Trust Agreement" means the voting and exchange trust
agreement among Newco, NAR Subco, CN and the Trustee.
Section 1.2 Sections and Headings.
The division of this Plan of Arrangement into sections and the insertion of
headings are for reference purposes only and shall not affect the interpretation
of this Plan of Arrangement. Unless otherwise indicated, any reference in this
Plan of Arrangement to a section, paragraph, appendix or an exhibit refers to
the specified section or paragraph of or appendix or exhibit to this Plan of
Arrangement.
Section 1.3 Number, Gender and Persons.
In this Plan of Arrangement, unless the context otherwise requires, words
importing the singular number include the plural and vice versa and words
importing any gender include all genders.
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ARTICLE 2
ARRANGEMENT
Section 2.1 Binding Effect.
This Plan of Arrangement will become effective at, and be binding at and
after, the Arrangement Effective Time. In particular, and without limiting the
generality of the foregoing, the Plan of Arrangement will be binding upon: (i)
CN, (ii) BNSF, (iii) Newco, (iv) NAR Subco, (v) all holders of CN Common Shares,
(vi) all holders of CN Stapled Units, CN Voting Shares and CN Exchangeable
Shares, and (vii) all holders of securities exchangeable for or convertible into
CN Common Shares, including without limitation CN Options.
Section 2.2 Arrangement.
Commencing at the Arrangement Effective Time, the following shall occur and
shall be deemed to occur in the following order without any further act or
formality:
(a) The authorized share capital of CN shall be reorganized by the
creation of the following four (4) additional classes of shares in the
capital of CN:
(i) a class of shares, designated as CN Voting Shares, the
authorized number of which shall be unlimited and which
shall reflect the CN Voting Share Provisions as set forth in
Appendix I;
(ii) a class of shares, designated as CN Exchangeable Shares, the
authorized number of which shall be unlimited and which
shall reflect the CN Exchangeable Share Provisions as set
forth in Appendix II;
(iii) a class of shares, designated as CN Special Limited Voting
Shares, the authorized number of which shall be unlimited
and which shall reflect the CN Special Limited Voting Share
Provisions set forth in Appendix III; and
(iv) a class of shares, designated as CN Non-voting Equity
Shares, the authorized number of which shall be unlimited
and which shall reflect the CN Non-voting Equity Share
Provisions set forth in Appendix IV.
(b) Each outstanding CN Common Share shall be changed into a number of CN
Voting Shares and a number of CN Exchangeable Shares in each case
equal to the Exchange Ratio.
(c) Simultaneously with the change in share capital under paragraph 2.2(b)
above, each Newco Elected Exchangeable Share will be transferred by
the holder thereof, without any further act or formality
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on his or her part, to NAR Subco, in exchange for one Newco Common
Share issued by Newco.
(d) Simultaneously with the change in share capital under paragraph 2.2(b)
above and the transfer to and acquisition by NAR Subco under paragraph
2.2(c) above of the Newco Elected Exchangeable Shares, each Newco
Elected Exchangeable Share acquired by NAR Subco shall be converted
into one (1) CN Special Limited Voting Share and one (1) CN Non-voting
Equity Share.
(e) Simultaneously with the change in share capital under paragraph 2.2(b)
above, the transfer to and acquisition by NAR Subco under paragraph
2.2(c) above of the Newco Elected Exchangeable Shares and the
conversion under paragraph 2.2(d) above of the Newco Elected
Exchangeable Shares, NAR Subco shall and shall be deemed to have
subscribed for and agreed to purchase and CN shall issue and sell to
NAR Subco one (1) CN Special Limited Voting Share and one (1) CN Non-
voting Equity Share upon payment by NAR Subco to CN of a sum equal to
the closing trading price, per share, of the CN Common Shares on the
TSE on the trading day which is two days prior to the Arrangement
Effective Date divided by the Exchange Ratio.
(f) The Persons entitled to receive Newco Common Shares pursuant to the
Merger at the Merger Effective Time (as defined in the Combination
Agreement), which for greater certainty shall exclude holders of Newco
Common Shares issued pursuant to the exchange provided for in
paragraph 2.2(c) above, shall be deemed to have subscribed for and
agreed to purchase at a purchase price of U.S.$0.05 per share and CN
shall issue to each such Person, one (1) CN Voting Share for each such
Newco Common Share upon payment by Newco to CN of the aggregate
subscription price therefor.
(g) Newco shall issue to and deposit with the Trustee the Special Voting
Share, in consideration of the payment to Newco of U.S.$0.01 by CN, to
be thereafter held of record by the Trustee as trustee for and on
behalf of, and for the use and benefit of, the holders of the CN
Exchangeable Shares in accordance with the Voting and Exchange Trust
Agreement.
(h) Each CN Option shall be exchanged for an option (a "Replacement
Option") to purchase a number of Newco Stapled Units equal to the
product of the Exchange Ratio multiplied by the number of CN Common
Shares subject to such CN Option. Such Replacement Option shall
provide for an exercise price per Newco Stapled Unit equal to the
exercise price per CN Common Share of such CN Option immediately prior
to the Arrangement Effective Time divided by the Exchange Ratio. If
the foregoing calculation results in a Replacement Option being
exerciseable for a fraction of a Newco Stapled Unit, then the
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number of Newco Stapled Units subject to such Replacement Option shall
be rounded up to the next whole number of Newco Stapled Units and the
total exercise price for the Replacement Option will be increased by
the exercise price of the fractional Newco Stapled Unit. The term to
expiry, conditions to and manner of exercising, vesting schedule, and
all other terms and conditions of such Replacement Option will
otherwise be unchanged from those which prevailed prior to the
implementation of the Merger and the Arrangement, and any document or
agreement previously evidencing a CN Option shall thereafter evidence
and be deemed to evidence such Replacement Option.
(i) The authorized share capital of CN shall be amended by the elimination
of the CN Common Shares as a class of authorized shares.
(j) The By-laws of CN shall be amended as set forth in Appendix V.
Section 2.3 Exchange Elections and Deemed Elections.
Each Person who, immediately prior to the Election Deadline, is a holder of
record of CN Common Shares, will be entitled, with respect to all or a portion
of such shares, to make an election at or prior to the Election Deadline to
exchange all or any CN Exchangeable Shares issuable to such holder pursuant to
the Arrangement for Newco Common Shares, on the basis provided for in this Plan
of Arrangement and in the Letter of Transmittal and Election Form.
Notwithstanding the foregoing, each holder of CN Common Shares who is not a
resident of Canada for purposes of the ITA at the Election Deadline will be
deemed to have elected to exchange all of the CN Exchangeable Shares issuable to
such holder pursuant to the Arrangement for Newco Common Shares on the basis
provided for in this Plan of Arrangement, and such holders' CN Exchangeable
Shares shall be deemed for all purposes to be Newco Elected Exchangeable Shares,
except where and to the extent that such non-resident holder specifically elects
in a Letter of Transmittal and Election Form received prior to the Election
Deadline not to have such exchange occur.
Section 2.4 Stated Capital.
The stated capital accounts of CN shall be dealt with as follows:
(a) The amount of the stated capital account attributable to the CN Voting
Shares following the Arrangement shall be equal to the sum of: (i) the
aggregate subscription price for the CN Voting Shares issued pursuant
to paragraph 2.2(f), and (ii) the product of U.S.$0.05 multiplied by
the number of CN Voting Shares issued upon the change of the CN Common
Shares pursuant to paragraph 2.2(b).
(b) The amount of the stated capital account attributable to the CN
Exchangeable Shares initially shall be equal to the amount of the
stated capital account attributable to the CN Common Shares
immediately prior to the Arrangement Effective Time less the amount
added to the
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stated capital account attributable to the CN Voting Shares under
paragraph 2.4(a)(ii).
(c) Coincident with the conversion of Newco Elected Exchangeable Shares
into CN Special Limited Voting Shares and CN Non-voting Equity Shares
pursuant to paragraph 2.2(d), the stated capital account attributable
to the CN Exchangeable Shares shall be reduced by an amount (the "CN
Converted Stated Capital Amount") equal to the amount provided for in
paragraph 2.4(b) (being the amount of the stated capital account
initially attributable to the CN Exchangeable Shares) multiplied by a
fraction, the numerator of which is the number of Newco Elected
Exchangeable Shares and the denominator of which is the number of CN
Common Shares outstanding immediately prior to the Arrangement
Effective Time multiplied by the Exchange Ratio.
(d) The amount of the stated capital account attributable to the CN Non-
voting Equity Shares following the Arrangement shall be the CN
Converted Stated Capital Amount plus the amount of the subscription
price of the one (1) CN Non-voting Equity Share and the one (1) CN
Special Limited Voting Share issued pursuant to paragraph 2.2(e) above
minus the product of (i) U.S.$0.05 multiplied by (ii) the number of
Newco Elected Exchangeable Shares plus one (1).
(e) The amount of the stated capital account attributable to the CN
Special Limited Voting Shares following the Arrangement shall be equal
to the product of (i) U.S.$0.05 multiplied by (ii) the number of Newco
Elected Exchangeable Shares plus one (1).
Section 2.5 Consideration.
For greater certainty, the consideration receivable by the former holders
of CN Common Shares pursuant to the change in share capital pursuant to
paragraph 2.2(b) shall, and shall for all purposes be deemed to, consist of the
CN Voting Shares and the CN Exchangeable Shares into which the CN Common Shares
are changed together with all of the rights attached to the CN Voting Shares,
the CN Exchangeable Shares and the CN Stapled Units representing same pursuant
to the Voting and Exchange Trust Agreement, this Plan of Arrangement, the CN
Voting Share Provisions and the CN Exchangeable Share Provisions.
Section 2.6 Restated Articles.
After giving effect to the Arrangement the Corporation is authorized to
file restated articles of incorporation under the CBCA. For greater certainty
but without limiting the generality of the foregoing, the outstanding voting
shares in the capital of CN shall at all times continue to be subject to the
share constraints contained in CN's articles of continuance as required pursuant
to the Commercialization Act as set forth in Exhibit "I".
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ARTICLE 3
RIGHTS OF DISSENT
Section 3.1 Rights of Dissent.
Holders of CN Common Shares may exercise rights of dissent ("Dissent
Rights") with respect to such shares pursuant to and in the manner set forth in
section 190 of the CBCA, the Interim Order and this section 3.1 (the "Dissent
Procedures") in connection with the Arrangement; provided that, notwithstanding
subsection 190(5) of the CBCA, the written objection to the Arrangement
Resolution referred to in subsection 190(5) of the CBCA must be received by CN
not later than 5:00 p.m. (Montreal time) on the Business Day preceding the CN
Shareholders Meeting. Holders of CN Common Shares who duly exercise such rights
of dissent and who:
(a) are ultimately entitled to be paid fair value for their CN Common
Shares shall be deemed to have transferred such CN Common Shares to CN
immediately prior to the Arrangement Effective Time to the extent the
fair value thereof is paid by CN, and such shares shall be cancelled
on the Arrangement Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair value for
their CN Common Shares shall be deemed to have participated in the
Arrangement on the same basis as a non-dissenting holder of CN Common
Shares and shall receive CN Voting Shares and CN Exchangeable Shares,
which may be deemed to be Newco Elected Exchangeable Shares and to
have been exchanged for Newco Common Shares, all in accordance with
sections 2.2 and 2.3,
but in no case shall CN or any other Person be required to recognize such
holders, or any other person, as holders of CN Common Shares after the
Arrangement Effective Time and the names of such holders of CN Common Shares
shall be deleted from the share register of CN in respect of the CN Common
Shares at the Arrangement Effective Time.
ARTICLE 4
CERTIFICATES, FRACTIONAL ENTITLEMENTS
AND SETTLEMENT PROCEDURES
Section 4.1 Issuance of Unit Certificates Representing CN Exchangeable Shares
and CN Voting Shares.
At or promptly after the Arrangement Effective Time, CN shall deposit with
the Depositary, as custodian for the benefit of the holders of CN Common Shares
who will receive CN Exchangeable Shares and CN Voting Shares pursuant to the
Arrangement, other than holders of Newco Elected Exchangeable Shares, CN Stapled
Unit certificates representing the CN Exchangeable Shares and CN Voting Shares
issued pursuant to paragraph 2.2(b) upon the change of the CN Common Shares.
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Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Arrangement Effective Time represented one or more CN
Common Shares that were so changed into CN Voting Shares and CN Exchangeable
Shares under the Arrangement (and were not Newco Elected Exchangeable Shares),
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the CBCA and the By-laws of CN and such additional documents and
instruments as the Depositary may reasonably require, the holder of such
surrendered certificate shall be entitled to receive in exchange therefor, and
the Depositary shall deliver to such holder, a certificate representing that
number (rounded down to the nearest whole number) of CN Stapled Units
representing the number (rounded down to the nearest whole number) of CN
Exchangeable Shares and CN Voting Shares which such holder has the right to
receive (together with any dividends or distributions with respect thereto
pursuant to section 4.3 and any cash representing that holder's pro rata
entitlement to the proceeds of the sale of fractional CN Stapled Units pursuant
to section 4.7), and the certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of CN Common Shares (except
CN Common Shares that were changed into Newco Elected Exchangeable Shares and CN
Voting Shares) that is not registered in the transfer records of CN, a
certificate representing the proper number of CN Stapled Units may be issued to
the transferee if the certificate representing such CN Common Shares is
presented to the Depositary, accompanied by all documents required to evidence
and effect such transfer. Until surrendered as contemplated by this section 4.1,
each certificate which immediately prior to the Arrangement Effective Time
represented CN Common Shares (except CN Common Shares that were changed into
Newco Elected Exchangeable Shares and CN Voting Shares) shall be deemed at all
times after the Arrangement Effective Time to represent only the right to
receive upon such surrender (i) the CN Stapled Unit certificate representing CN
Exchangeable Shares and CN Voting Shares as contemplated by this section 4.1,
(ii) a cash payment representing that holder's pro rata entitlement to the
proceeds of the sale of fractional CN Stapled Units pursuant to section 4.7, and
(iii) any dividends or distributions with a record date after the Arrangement
Effective Time theretofore paid or payable with respect to CN Exchangeable
Shares as contemplated by section 4.3.
Section 4.2 Issue of Unit Certificates Representing Newco Common Shares and CN
Voting Shares.
At or promptly after the Arrangement Effective Time, Newco, NAR Subco and
CN shall jointly cause to be deposited Newco Stapled Unit certificates
(representing the Newco Common Shares and the CN Voting Shares issued pursuant
to the Merger and the Plan of Arrangement) with the Depositary, as custodian for
the benefit of the: (i) former holders of BNSF Common Shares entitled to receive
Newco Common Shares pursuant to the Merger and CN Voting Shares under the
Arrangement pursuant to paragraph 2.2(f) of this Plan of Arrangement, and (ii)
former holders of CN Common Shares who received Newco Elected Exchangeable
Shares and CN Voting Shares pursuant to the Plan of Arrangement. Upon surrender
to the Depositary for cancellation of a certificate which immediately prior to
the Arrangement Effective Time represented outstanding CN Common Shares that
were
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changed into CN Voting Shares and Newco Elected Exchangeable Shares, together
with such other documents and instruments as would have been required under the
CBCA and CN's By-laws, to effect the transfer of the shares formerly represented
by such certificates and such additional documents and instruments as the
Depositary may reasonably require, the holder of such a surrendered certificate
shall be entitled to receive in exchange therefor, and the Depositary shall
deliver to such holder, a certificate representing that number (rounded down to
the nearest whole number) of Newco Stapled Units representing the number
(rounded down to the nearest whole number) of Newco Common Shares and CN Voting
Shares which such holder has the right to receive (together with any dividends
or distributions with respect thereto pursuant to section 4.3 and any cash
representing that holder's pro rata entitlement to the proceeds of the sale of
fractional Newco Stapled Units pursuant to section 4.7), and the certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of CN Common Shares which is not registered in the transfer records of
CN, a Newco Stapled Unit certificate representing the proper number of Newco
Common Shares and CN Voting Shares may be issued to the transferee if the
certificate representing such CN Common Shares is presented to the Depositary,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this section 4.2, each certificate which
immediately prior to the Arrangement Effective Time represented one or more
outstanding CN Common Shares that were changed into CN Voting Shares and Newco
Elected Exchangeable Shares shall be deemed at all times after the Arrangement
Effective Time to represent only the right to receive upon such surrender (i)
the Newco Stapled Unit certificate representing Newco Common Shares and CN
Voting Shares as contemplated by this section 4.2, (ii) a cash payment
representing that holder's pro rata entitlement to the proceeds of the sale of
fractional Newco Stapled Units pursuant to section 4.7, and (iii) any dividends
or distributions with a record date after the Arrangement Effective Time
theretofore paid or payable with respect to Newco Common Shares as contemplated
by section 4.3.
Section 4.3 Distributions with Respect to Unsurrendered Certificates.
No dividends or other distributions declared or made after the Arrangement
Effective Time with respect to CN Exchangeable Shares or Newco Common Shares, as
applicable, with a record date after the Arrangement Effective Time shall be
paid to the holder of any unsurrendered certificate which immediately prior to
the Arrangement Effective Time represented outstanding CN Common Shares that
were changed or changed and exchanged, as applicable, pursuant to section 2.2,
unless and until the holder of record of such certificate shall surrender such
certificate in accordance with section 4.1 or 4.2, as applicable. Subject to
applicable law, at the time of such surrender of any such certificate, there
shall be paid to the holder of record of the certificates formerly representing
CN Common Shares, without interest, (i) the amount of dividends or other
distributions with a record date after the Arrangement Effective Time
theretofore paid with respect to such CN Exchangeable Share or Newco Common
Share, as the case may be, and (ii) on the appropriate payment date, the amount
of dividends or other distributions with a record date after the Arrangement
Effective Time but prior to surrender and a
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payment date subsequent to surrender payable with respect to such CN
Exchangeable Share or Newco Common Share, as the case may be.
Section 4.4 Stapling of CN Voting Shares.
The Articles of Arrangement of CN shall provide as follows. Except as
expressly provided in this Plan of Arrangement and in this section 4.4, no CN
Voting Share shall be or shall be capable of being issued, transferred,
transmitted or otherwise alienated or disposed of separately from and otherwise
than as part of either: (i) a CN Stapled Unit comprised of an equal number of CN
Voting Shares and CN Exchangeable Shares, or (ii) a Newco Stapled Unit comprised
of an equal number of CN Voting Shares and Newco Common Shares. Except as
expressly provided in this Plan of Arrangement and in this section 4.4, no CN
Exchangeable Share shall be or shall be capable of being issued, transferred,
transmitted or otherwise alienated or disposed of separately from and otherwise
than as part of a CN Stapled Unit comprised of an equal number of CN Voting
Shares and CN Exchangeable Shares. Notwithstanding the foregoing, the following
issuances and transfers of CN Voting Shares otherwise than as part of a CN
Stapled Unit or Newco Stapled Unit are hereby expressly permitted:
(i) the issuances of CN Voting Shares provided in Section 2.2.
Notwithstanding the foregoing, the following issuances and transfers of CN
Exchangeable Shares otherwise than as part of a CN Stapled Unit are hereby
expressly permitted:
(i) the issuances of CN Exchangeable Shares provided in Section
2.2;
(ii) the transfers of CN Exchangeable Shares to NAR Subco and the
conversion thereof to CN Limited Voting Shares and CN Non-
voting Equity Shares provided in Section 2.2;
(iii) the redemption of CN Exchangeable Shares by CN upon a
retraction of the CN Exchangeable Shares in accordance with
the CN Exchangeable Share Provisions; and
(iv) the transfer of CN Exchangeable Shares to NAR Subco and/or
Newco, as applicable, pursuant to its exercise or deemed
exercise of a Retraction Call Right, the Liquidation Call
Right, the Exchange Right or the Automatic Exchange Rights
in accordance with the CN Exchangeable Share Provisions, the
Plan of Arrangement and/or the Voting and Exchange Trust
Agreement, as applicable.
Without limiting the generality of the foregoing, CN shall be entitled to treat
the registered holder of CN Stapled Units (or, subject to such Person furnishing
such information as is described in subsection 77(4) of the CBCA or any
replacement or successor provision therefor, the executor, administrator, heir
or legal representative
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of the heirs, of the estate of a deceased holder, a guardian, committee,
trustee, curator or tutor representing a holder who is an infant, an incompetent
person or a missing person, or a liquidator of or a trustee in bankruptcy for a
holder) as the owner exclusively entitled to vote, to receive notices, to
receive dividends or other payments in respect of and otherwise to exercise all
the rights and powers of the owner of the CN Voting Shares and the CN
Exchangeable Shares represented by such CN Stapled Unit. For purposes of
establishing and maintaining the share register for the outstanding CN Voting
Shares, CN and its Transfer Agent shall and shall be entitled at all times
(subject only to the exercise of the Liquidation Call Right) to treat each
registered holder of CN Stapled Units and of Newco Stapled Units as the
registered holder of a number of CN Voting Shares equal to the aggregate number
of CN Stapled Units and Newco Stapled Units held by such Person. For purposes of
establishing and maintaining the share register for the outstanding CN
Exchangeable Shares, CN and its Transfer Agent shall and shall be entitled, at
all times (subject only to the Liquidation Call Right, the Exchange Right and
the Automatic Exchange Rights and except where a holder of CN Stapled Units
representing CN Exchangeable Shares has submitted a Retraction Request in
respect of CN Exchangeable Shares represented by such CN Stapled Unit
certificate) to treat each registered holder of CN Stapled Units as the
registered holder of a number of CN Exchangeable Shares equal to the number of
CN Stapled Units held by such Person. Without limiting the generality of the
foregoing, a CN Stapled Unit certificate shall be the security certificate, and
the only security certificate, that a holder of CN Voting Shares and CN
Exchangeable Shares comprising such CN Stapled Units shall be entitled to
receive in respect of his or her holding of CN Voting Shares and CN Exchangeable
Shares pursuant to the CBCA or otherwise and a Newco Stapled Unit certificate
shall be the security certificate, and the only security certificate, that a
holder of CN Voting Shares and Newco Common Shares comprising such Newco Stapled
Unit shall be entitled to receive in respect of his or her holding of CN Voting
Shares pursuant to the CBCA or otherwise.
Section 4.5 Lost Certificates.
In the event any certificate which immediately prior to the Arrangement
Effective Time represented one or more outstanding CN Common Shares that were
changed and, if applicable, exchanged pursuant to section 2.2 shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such certificate to be lost, stolen or destroyed, the Depositary
will issue in exchange for such lost, stolen or destroyed certificate, one or
more CN Stapled Unit certificates or Newco Stapled Unit certificates
representing one or more CN Exchangeable Shares and CN Voting Shares or Newco
Common Shares and CN Voting Shares (and any dividends or distributions with
respect thereto and any entitlements of the holder thereof to the proceeds of
sale of fractional CN Stapled Units or Newco Stapled Units pursuant to section
4.7) issuable and deliverable in accordance with the Plan of Arrangement and
such holder's Letter of Transmittal and Election Form. When authorizing such
payment in exchange for any lost, stolen or destroyed certificate, the Person to
whom such unit certificates are to be issued shall, as a condition precedent to
the issuance thereof, give a bond satisfactory to CN and/or Newco, as
applicable, and their respective transfer agents in such sum as CN
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and/or Newco, as applicable, may direct or otherwise indemnify CN and Newco in a
manner satisfactory to CN and/or Newco, as applicable, against any claim that
may be made against CN and/or Newco, as applicable, with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4.6 Withholding Rights.
CN, Newco, NAR Subco and the Depositary shall be entitled to deduct and
withhold from any dividend or consideration otherwise payable to any holder of
CN Stapled Units representing CN Exchangeable Shares or Newco Stapled Units
representing Newco Common Shares such amounts as CN, Newco, NAR Subco or the
Depositary is required or permitted to deduct and withhold with respect to such
payment under the ITA, the United States Internal Revenue Code of 1986 or any
provision of provincial, state, local or foreign tax law, in each case, as
amended. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the holder of the
shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or permitted to be deducted
or withheld from any payment to a holder exceeds the cash portion of the
consideration otherwise payable to the holder, CN, Newco, NAR Subco and the
Depositary are hereby authorized to sell or otherwise dispose of such portion of
the consideration as is necessary to provide sufficient funds to CN, Newco, NAR
Subco or the Depositary, as the case may be, to enable it to comply with such
deduction or withholding requirement and CN, Newco, NAR Subco or the Depositary
shall notify the holder thereof and remit any unapplied balance of the net
proceeds of such sale.
Section 4.7 No Fractional Units.
No certificates or scrip representing fractional CN Stapled Units,
fractional Newco Stapled Units, fractional CN Exchangeable Shares, fractional CN
Voting Shares or fractional Newco Common Shares shall be issued or delivered
upon the surrender for exchange of certificates pursuant to section 4.1 or 4.2
and such fractional interests shall not entitle the owner thereof to exercise
any rights as a security holder of CN or Newco. In lieu of any such fractional
securities:
(a) each Person otherwise entitled to a fractional interest in a CN
Stapled Unit (comprising a fractional interest in a CN Voting Share
and a fractional interest in a CN Exchangeable Share) will receive a
cash payment equal to such Person's pro rata portion of the net
proceeds after expenses received by the Depositary upon the sale of
whole units representing an accumulation of all fractional interests
in CN Stapled Units to which all such Persons would otherwise be
entitled. The Depositary will sell such CN Stapled Units on the TSE as
soon as reasonably practicable following the Arrangement Effective
Date. The aggregate net proceeds after expenses of such sale will be
distributed by the Depositary, pro rata in relation to the respective
fractions, among the Persons otherwise entitled to receive fractional
interests in CN Stapled Units; and
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(b) each Person otherwise entitled to a fractional interest in a Newco
Stapled Unit (comprising a fractional interest in a CN Voting Share
and a fractional interest in a Newco Common Share) will receive a cash
payment equal to such Person's pro rata portion of the net proceeds
after expenses received by the Depositary upon the sale of whole units
representing an accumulation of all fractional interests in Newco
Stapled Units to which all such Persons would otherwise be entitled.
The Depositary will sell such Newco Stapled Units on the NYSE as soon
as reasonably practicable following the Arrangement Effective Date.
The aggregate net proceeds after expenses of such sale will be
distributed by the Depositary, pro rata in relation to the respective
fractions, among the Persons otherwise entitled to receive fractional
interests in Newco Stapled Units.
ARTICLE 5
CERTAIN RIGHTS OF NAR SUBCO TO ACQUIRE CN EXCHANGEABLE SHARES
Section 5.1 NAR Subco Liquidation Call Right.
(a) NAR Subco shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of CN pursuant to Article 5 of
the CN Exchangeable Share Provisions, to purchase from all but not
less than all of the holders of CN Stapled Units representing CN
Exchangeable Shares (other than any holder which is an Affiliate of
Newco as defined in the CN Exchangeable Share Provisions) on the
Liquidation Date all but not less than all of the CN Exchangeable
Shares held by each such holder on payment by NAR Subco of an amount
per share (the "Liquidation Call Purchase Price") equal to the
Current Market Price of a Newco Stapled Unit on the last Business Day
prior to the Liquidation Date, which shall be satisfied in full by NAR
Subco causing to be issued to such holder one Newco Common Share, and,
to the extent not paid by CN, pay to such holder an additional amount
equivalent to the full amount of all declared and unpaid dividends on
each such CN Exchangeable Share held by such holder on any dividend
record date which occurred prior to the date of purchase by NAR Subco
(the "Dividend Amount"). In the event of the exercise of the
Liquidation Call Right by NAR Subco, each holder shall be obligated to
sell all the CN Exchangeable Shares represented by the CN Stapled
Units held by such holder to NAR Subco on the Liquidation Date on
payment by NAR Subco to such holder of the Liquidation Call Purchase
Price for each such share, and CN shall have no obligation to redeem
such shares so purchased by NAR Subco.
(b) To exercise the Liquidation Call Right, NAR Subco must notify CN's
transfer agent (the "Transfer Agent"), as agent for the holders of CN
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Stapled Units representing CN Exchangeable Shares, and CN of NAR
Subco's intention to exercise such right at least 45 days before the
Liquidation Date in the case of a voluntary liquidation, dissolution
or winding-up of CN and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or winding-up of CN. The Transfer Agent will notify the
holders of CN Stapled Units representing CN Exchangeable Shares as to
whether or not NAR Subco has exercised the Liquidation Call Right
forthwith after the expiry of the period during which the same may be
exercised by NAR Subco. If NAR Subco exercises the Liquidation Call
Right, then on the Liquidation Date NAR Subco will purchase and the
holders will sell all of the CN Exchangeable Shares then outstanding
for a price per share equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the CN Exchangeable
Shares pursuant to the Liquidation Call Right, Newco and NAR Subco
shall jointly cause to be deposited with the Transfer Agent, on or
before the Liquidation Date, certificates representing the aggregate
number of Newco Common Shares to which holders of CN Exchangeable
Shares are entitled upon such exchange and a cheque or cheques of NAR
Subco payable at par at any branch of the bankers of NAR Subco
representing the aggregate Dividend Amount in payment of the total
Liquidation Call Purchase Price, less any amounts withheld pursuant to
section 4.6 hereof. Provided that NAR Subco has complied with the
immediately preceding sentence, on and after the Liquidation Date the
rights of each holder of CN Stapled Units representing CN Exchangeable
Shares will be limited to receiving such holder's proportionate part
of the total Liquidation Call Purchase Price payable by NAR Subco,
together with the liquidation entitlement in respect of the CN Voting
Shares represented thereby payable by CN, upon presentation and
surrender by the holder of certificates for CN Stapled Units
representing the CN Exchangeable Shares and CN Voting Shares held by
such holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the Newco
Common Shares to which it is entitled. Upon surrender to the Transfer
Agent of a CN Stapled Unit certificate, together with such other
documents and instruments as may be required to effect a transfer of
CN Stapled Units under the CBCA and the by-laws of CN and such
additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and
the Transfer Agent on behalf of NAR Subco shall deliver to such
holder, certificates representing the Newco Common Shares to which the
holder is entitled and a cheque or cheques of NAR Subco payable at par
at any branch of the bankers of NAR Subco in payment of the remaining
portion, if any, of the total Liquidation Call Purchase Price, less
any amounts withheld pursuant to section 4.6 hereof. If NAR
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Subco does not exercise the Liquidation Call Right in the manner
described above, on the Liquidation Date the holders of the CN Stapled
Units representing the CN Exchangeable Shares will be entitled to
receive in exchange therefor the liquidation price otherwise payable
in respect of the CN Exchangeable Shares by CN in connection with the
liquidation, dissolution or winding-up of CN pursuant to Article 5 of
the CN Exchangeable Share Provisions.
ARTICLE 6
AMENDMENTS
Section 6.1 Amendments to Plan of Arrangement.
CN reserves the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time prior to the Arrangement Effective
Date, provided that each such amendment, modification and/or supplement must be
(i) set out in writing, (ii) approved by BNSF, (iii) filed with the Court and,
if made following the CN Shareholders Meeting, approved by the Court, and (iv)
communicated to holders of CN Common Shares if and as required by the Court.
Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by CN at any time prior to the CN Shareholders Meeting (provided
that BNSF shall have consented thereto) with or without any other prior notice
or communication (all as may be required under the Interim Order), and if so
proposed and accepted by the Persons voting at the CN Shareholders Meeting shall
become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement that
is approved by the Court following the CN Shareholders Meeting shall be
effective only if it is consented to by each of CN and BNSF.
<PAGE>
APPENDIX I
PROVISIONS ATTACHING TO THE
CN VOTING SHARES
The CN Voting Shares shall have attached thereto the following rights,
privileges, restrictions and conditions:
1. No Dividends
1.1 The holders of CN Voting Shares, as such, shall not be entitled to receive
any dividends.
2. Dissolution
2.1 In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary of involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding up
its affairs, subject to the prior rights of the holders of the Preference
Shares, the CN Exchangeable Shares and of any other shares ranking senior to the
CN Voting Shares with respect to priority in the distribution of assets upon
dissolution, liquidation or winding-up but before any amount shall be paid to or
any assets distributed among the holders of CN Special Limited Voting Shares, CN
Non-voting Equity Shares or the holders of any other class of shares of the
Corporation ranking subordinate to the CN Voting Shares, the holders of the CN
Voting Shares shall be entitled to receive the sum of U.S$0.05 per CN Voting
Share. After payment to the holders of the CN Voting Shares of such amount, the
holders of the CN Voting Shares shall not be entitled to share in any further
distribution of the assets of the Corporation.
3. Voting Rights
3.1 The holders of the CN Voting Shares shall be entitled to receive notice of
and to attend all meetings of the shareholders of the Corporation and shall have
one vote for each CN Voting Share held at all meetings of the shareholders of
the Corporation and on all matters voted on by shareholders of the Corporation,
except for meetings at which and matters on which only holders of another
specified class or series of shares of the Corporation are entitled to vote
separately as a class or series.
4. Reciprocal Changes in respect of CN Exchangeable Shares
4.1 CN shall not:
(a) subdivide, redivide or change the then outstanding CN Voting Shares
into a greater number of CN Voting Shares; or
(b) reduce, combine, consolidate or change the then outstanding CN Voting
Shares into a lesser number of CN Voting Shares;
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unless the same change shall simultaneously be made to the CN Exchangeable
Shares.
5. Purchase for Cancellation
5.1 CN shall not purchase for cancellation any CN Voting Shares except in
accordance with section 7.1 of the CN Exchangeable Share Provisions.
6. Staple
6.1 Except as expressly provided in the Plan of Arrangement and in this section
6.1, no CN Voting Share shall be or shall be capable of being issued,
transferred, transmitted or otherwise alienated or disposed of separately from
and otherwise than as part of either: (i) a CN Stapled Unit comprised of an
equal number of CN Voting Shares and CN Exchangeable Shares, or (ii) a Newco
Stapled Unit comprised of an equal number of CN Voting Shares and Newco Common
Shares. Notwithstanding the foregoing, the following issuances and transfers of
CN Voting Shares otherwise than as part of a CN Stapled Unit or Newco Stapled
Unit are hereby expressly permitted:
(i) the issuances of CN Voting Shares provided in Section 2.2 of the Plan
of Arrangement.
Without limiting the generality of the foregoing, CN shall be entitled to treat
the registered holder of CN Stapled Units (or, subject to such Person furnishing
such information as is described in subsection 77(4) of the CBCA or any
replacement or successor provision therefor, the executor, administrator, heir
or legal representative of the heirs, of the estate of a deceased holder, a
guardian, committee, trustee, curator or tutor representing a holder who is an
infant, an incompetent person or a missing person, or a liquidator of or a
trustee in bankruptcy for a holder) as the owner exclusively entitled to vote,
to receive notices and otherwise to exercise all the rights and powers of the
owner of the CN Voting Shares represented by such CN Stapled Unit. For purposes
of establishing and maintaining the share register for the outstanding CN Voting
Shares, CN and its Transfer Agent shall and shall be entitled at all times
(subject only to the exercise of the Liquidation Call Right) to treat each
registered holder of CN Stapled Units and of Newco Stapled Units as the
registered holder of a number of CN Voting Shares equal to the aggregate number
of CN Stapled Units and Newco Stapled Units held by such Person. A CN Stapled
Unit certificate or a Newco Stapled Unit certificate, as applicable, shall be
the security certificate, and the only security certificate, that a holder of CN
Voting Shares shall be entitled to receive in respect of his or her holding of
CN Voting Shares pursuant to the CBCA or otherwise.
<PAGE>
APPENDIX II
PROVISIONS ATTACHING TO THE
CN EXCHANGEABLE SHARES
The CN Exchangeable Shares shall have the following rights, privileges,
restrictions and conditions:
ARTICLE 1
INTERPRETATION
Section 1.1 For the purposes of these share provisions:
"Affiliate" means an affiliated body corporate within the meaning of the CBCA.
"associate" has the meaning ascribed thereto in Exhibit "I".
"Automatic Exchange Right" has the meaning ascribed thereto in the Voting and
Exchange Trust Agreement.
"Board of Directors" means the board of directors of the Corporation.
"Business Day" means any day on which commercial banks are generally open for
business in New York, New York and Montreal, Quebec other than a Saturday, a
Sunday or a day observed as a holiday in Montreal, Quebec under the laws of the
Province of Quebec or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"CN Exchangeable Shares" mean the Non-voting exchangeable shares in the capital
of the Corporation having the rights, privileges, restrictions and conditions
set forth herein.
"CN Non-voting Equity Share" means a non-voting equity share in the capital of
the Corporation.
"CN Special Limited Voting Share" means a special limited voting share in the
capital of the Corporation.
"CN Stapled Unit" means a unit comprised of one CN Voting Share and one CN
Exchangeable Share, which unit does not constitute a security independent of the
shares it represents.
"CN Voting Share" means a voting share in the capital of the Corporation.
"Canadian Dollar Equivalent" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying:
(a) the Foreign Currency Amount by,
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(b) the noon spot exchange rate on such date for such foreign currency
expressed in Canadian dollars as reported by the Bank of Canada or, in
the event such spot exchange rate is not available, such spot exchange
rate on such date for such foreign currency expressed in Canadian
dollars as may be deemed by the Board of Directors to be appropriate
for such purpose.
"Co-operation Agreement" means that certain Co-operation Agreement between
Newco, NAR Subco and the Corporation, to be entered into in connection with the
Plan of Arrangement.
"Corporation" means Canadian National Railway Company.
"Current Market Price" means, in respect of a Newco Stapled Unit on any date,
the Canadian Dollar Equivalent of the average of the closing bid and asked
prices of Newco Stapled Units during a period of 20 consecutive trading days
ending not more than three trading days before such date on the New York Stock
Exchange, or, if the Newco Stapled Units are not then quoted on the New York
Stock Exchange, on such other stock exchange or automated quotation system on
which the Newco Stapled Units are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose; provided, however, that
if in the opinion of the Board of Directors the public distribution or trading
activity of Newco Stapled Units during such period does not create a market
which reflects the fair market value of a Newco Stapled Unit, then the Current
Market Price of a Newco Stapled Unit shall be determined by the Board of
Directors, in good faith and in its sole discretion, and provided further that
any such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"Dividend Amount" has the meaning ascribed thereto in section 6.3 of these share
provisions.
"Exchange Right" has the meaning ascribed thereto in the Voting and Exchange
Trust Agreement.
"ITA" means the Income Tax Act (Canada).
"Liquidation Amount" has the meaning ascribed thereto in section 5.1 of these
share provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Date" has the meaning ascribed thereto in section 5.1 of these
share provisions.
"Maximum Individual Holdings" has the meaning ascribed thereto in Exhibit "I".
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"NAR Subco" means [NAR Holdings Company], an unlimited liability company
existing under the laws of the Province of Nova Scotia and a wholly-owned
subsidiary of Newco.
"NAR Subco Call Notice" has the meaning ascribed thereto in section 6.3 of these
share provisions.
"Newco" means North American Railways, Inc., a corporation existing under the
laws of the State of Delaware, and any successor corporation thereto.
"Newco Common Shares" mean the shares of common stock in the capital of Newco,
and any other securities into which such shares may be changed.
"Newco Dividend Declaration Date" means the date on which the Board of Directors
of Newco declares any dividend on the Newco Common Shares.
"Newco Stapled Unit" means a unit comprised of one CN Voting Share and one Newco
Common Share, which unit does not constitute a security independent of the
shares it represents.
"Person" includes any individual, firm, partnership, joint venture, venture
capital fund, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status; provided that for purposes of
section 3.7 and Article 14, "person" has the meaning ascribed thereto in Exhibit
"I".
"Plan of Arrangement" means the plan of arrangement relating to the arrangement
of CN under section 192 of the Canada Business Corporations Act, to which plan
these share provisions are attached as Appendix II.
"Preference Shares" means the Class A Preferred Shares and Class B Preferred
Shares in the capital of the Corporation.
"Purchase Price" has the meaning ascribed thereto in section 6.3 of these share
provisions.
"Retracted Shares" has the meaning ascribed thereto in paragraph 6.1(a) of these
share provisions.
"Retraction Call Right" has the meaning ascribed thereto in paragraph 6.1(c) of
these share provisions.
"Retraction Date" has the meaning ascribed thereto in paragraph 6.1(b) of these
share provisions.
"Retraction Price" has the meaning ascribed thereto in section 6.1 of these
share provisions.
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"Retraction Request" has the meaning ascribed thereto in section 6.1 of these
share provisions.
"Transfer Agent" means The Trust Company of the Bank of Montreal or such other
Person as may from time to time be appointed by the Corporation as the registrar
and transfer agent for the Exchangeable Shares.
"Trustee" means the trustee under the Voting and Exchange Trust Agreement, being
a corporation organized and existing under the laws of Canada and authorized to
carry on the business of a trust company in all the provinces of Canada, and any
successor trustee appointed under the Voting and Exchange Trust Agreement.
"Voting and Exchange Trust Agreement" means that certain Voting and Exchange
Trust Agreement among Newco, NAR Subco, the Corporation and the Trustee, to be
entered into in connection with the Plan of Arrangement.
"voting shares" has the meaning ascribed thereto in Exhibit "I".
ARTICLE 2
RANKING OF CN EXCHANGEABLE SHARES
Section 2.1 Subject to the prior rights of the holders of the Preference Shares,
the CN Exchangeable Shares shall be entitled to a preference over and shall rank
in priority to the CN Special Limited Voting Shares, the CN Voting Shares, the
CN Non-voting Equity Shares and any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends and the
distribution of assets in the event of the liquidation, dissolution or winding-
up of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation, among its shareholders for the
purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
Section 3.1 A holder of a CN Exchangeable Share shall be entitled to receive and
the Board of Directors shall, subject to applicable law, on each Newco Dividend
Declaration Date, declare a dividend or other distribution on each CN
Exchangeable Share:
(a) in the case of a cash dividend declared on the Newco Common Shares, in
an amount in cash for each CN Exchangeable Share in U.S. dollars, or
the Canadian Dollar Equivalent thereof on the Newco Dividend
Declaration Date, in each case, corresponding to the cash dividend
declared on each Newco Common Share;
(b) in the case of a stock dividend declared on the Newco Common Shares to
be paid in Newco Common Shares and CN Voting Shares represented by
Newco Stapled Units, in such number of CN Exchangeable Shares and CN
Voting Shares represented by CN Stapled
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Units for each CN Exchangeable Share as is equal to the number of
Newco Common Shares and CN Voting Shares represented by Newco Stapled
Units to be paid on each Newco Common Share unless, in lieu of such
stock dividend, CN elects to effect a corresponding and
contemporaneous subdivision of the outstanding CN Exchangeable Shares
and CN Voting Shares;
(c) in the case of a dividend or other distribution of rights, options or
warrants to subscribe for or purchase Newco Common Shares and CN
Voting Shares represented by Newco Stapled Units (a "Newco Right"), in
such number of rights, options or warrants to subscribe for or
purchase CN Exchangeable Shares and CN Voting Shares represented by CN
Stapled Units (a "CN Right") for each CN Exchangeable Share as is
equal to the number of Newco Rights to be paid or distributed on each
Newco Common Share provided that such CN Rights shall have the same
subscription or exercise price (or the Canadian Dollar Equivalent
thereof) as the Newco Rights and otherwise be on the same terms as the
Newco Rights; or
(d) in the case of a dividend or other distribution declared on the Newco
Common Shares in property other than cash, Newco Stapled Units or
Newco Rights, in such type and amount of property for each CN
Exchangeable Share as is the same as or corresponds to or, in the
event that it is not reasonably practicable in accordance with
applicable legal requirements as determined by the Board of Directors
to declare and pay the same or a corresponding dividend or other
distribution, as is economically equivalent to (to be determined by
the Board of Directors as contemplated by section 3.5 hereof) the type
and amount of property declared as a dividend on each Newco Common
Share.
Such dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized but
unissued shares of the Corporation, as applicable.
Section 3.2 Cheques of the Corporation payable at par at any branch of the
bankers of the Corporation shall be issued in respect of any cash dividends
contemplated by paragraph 3.1(a) hereof and the sending of such a cheque to the
holder of a CN Stapled Unit of which such CN Exchangeable Share forms part shall
satisfy the cash dividend represented thereby unless the cheque is not paid on
presentation. Certificates registered in the name of the registered holder of CN
Stapled Units of which the CN Exchangeable Share forms a part shall be issued or
transferred in respect of any stock dividends or distributions of CN Rights
contemplated by paragraph 3.1(b) or 3.1(c) hereof and the sending of such a
certificate to the holder of a CN Stapled Unit shall satisfy the stock dividend
or CN Rights distribution represented thereby. Such other type and amount of
property in respect of any dividends contemplated by paragraph 3.1(d) hereof
shall be issued, distributed or transferred by the Corporation in such manner as
it shall determine and the issuance, distribution or transfer thereof by the
Corporation to each holder
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of a CN Stapled Unit shall satisfy the dividend represented thereby. No holder
of a CN Exchangeable Share shall be entitled to recover by action or other legal
process against the Corporation any dividend that is represented by a cheque
that has not been duly presented to the Corporation's bankers for payment or
that otherwise remains unclaimed for a period of six years from the date on
which such dividend was payable.
Section 3.3 The record date for the determination of the holders of CN Stapled
Units entitled to receive payment of, and the payment date for, any dividend
declared on the CN Exchangeable Shares under section 3.1 hereof shall be the
same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the Newco Common Shares.
Section 3.4 If on any payment date for any dividends declared on the CN
Exchangeable Shares under section 3.1 hereof the dividends are not paid in full
on all of the CN Exchangeable Shares then outstanding, any such dividends that
remain unpaid shall be paid on a subsequent date or dates determined by the
Board of Directors on which the Corporation shall have sufficient moneys, assets
or property properly applicable to the payment of such dividends.
Section 3.5 The Board of Directors shall determine, in good faith and in its
sole discretion, economic equivalence for the purposes of paragraphs 3.1(d),
10.1 and 10.2 hereof, and each such determination shall be conclusive and
binding on the Corporation and its shareholders. In making each such
determination, the following factors may, without excluding other factors
determined by the Board of Directors to be relevant, be considered by the Board
of Directors:
(a) the relationship between the fair market value (as determined by the
Board of Directors in the manner above contemplated) of such property
to be issued or distributed with respect to each outstanding Newco
Common Share and the current market value (as determined by the Board
of Directors in the manner above contemplated) of a Newco Stapled
Unit; and
(b) the general taxation consequences of the relevant event to holders of
CN Stapled Units to the extent that such consequences may differ from
the taxation consequences to holders of Newco Stapled Units as a
result of differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a result of
differing marginal taxation rates and without regard to the individual
circumstances of holders of CN Stapled Units).
For purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be the
average of the closing trading or bid and ask prices of such security during a
period of not less than 20 consecutive trading days ending not more than three
trading days before the date of determination on the principal securities
exchange on which such securities are listed and traded or quoted; provided,
however, that if in the opinion of the
<PAGE>
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Board of Directors the public distribution or trading activity of such
securities during such period does not create a market which reflects the fair
market value of such securities, then the current market value thereof shall be
determined by the Board of Directors, in good faith and in its sole discretion,
and provided further that any such determination by the Board of Directors shall
be conclusive and binding on the Corporation and its shareholders.
Section 3.6 CN and the Transfer Agent shall be entitled to deduct and withhold
from any dividend or consideration otherwise payable to any holder of CN Stapled
Units representing CN Exchangeable Shares such amounts as CN or the Transfer
Agent is required or permitted to deduct and withhold with respect to such
payment under the ITA, the United States Internal Revenue Code of 1986 or any
provision of provincial, state, local or foreign tax law, in each case, as
amended. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the holder of the
shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amount so required or permitted to be deducted
or withheld from any payment to a holder exceeds the cash portion of the
consideration otherwise payable to the holder, CN and the Transfer Agent are
hereby authorized to sell or otherwise dispose of such portion of the
consideration as is necessary to provide sufficient funds to CN or the Transfer
Agent, as the case may be, to enable it to comply with such deduction or
withholding requirement and CN or the Transfer Agent shall notify the holder
thereof and remit any unapplied balance of the net proceeds of such sale.
Section 3.7 Notwithstanding the foregoing provisions of this Article 3, where
the total number of voting shares held, beneficially owned or controlled,
directly or indirectly, by any one person holding CN Stapled Units together with
his or her associates exceeds the Maximum Individual Holdings, the percentage of
any and all dividends attributable to the CN Exchangeable Shares comprising the
CN Stapled Units resulting in such person exceeding the Maximum Individual
Holding shall be forfeited and the amount of the dividend so forfeited shall not
become payable thereafter to any person for any reason whatsoever provided that
notwithstanding any other provision of this Article 3:
(a) the directors of CN may determine to pay a dividend to or to make any
other distribution on CN Exchangeable Shares that would otherwise be
prohibited hereby where the contravention of the Maximum Individual
Holdings that gave rise to such prohibition was inadvertent or of a
technical nature or it would otherwise be inequitable not to pay the
dividend or make the distribution; and
(b) where a dividend has not been paid or any other distribution has not
been made on CN Exchangeable Shares comprising CN Stapled Units held
by a person as a result of a directors' determination of a
contravention of the Maximum Individual Holdings, the directors of CN
shall declare and pay the dividend or make the distribution to the
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relevant person if they subsequently determine that no such
contravention occurred.
ARTICLE 4
CERTAIN RESTRICTIONS
Section 4.1 So long as any of the CN Exchangeable Shares are outstanding unless
all dividends on the outstanding CN Exchangeable Shares corresponding to
dividends declared and paid to date on the Newco Common Shares shall have been
declared and paid on the CN Exchangeable Shares as provided in Article 3, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the CN Exchangeable Shares given as specified in
section 9.2 of these share provisions:
(a) pay any dividends on the CN Non-voting Equity Shares or any other
shares ranking junior to the CN Exchangeable Shares, other than stock
dividends payable in CN Non-voting Equity Shares or any such other
shares ranking junior to the CN Exchangeable Shares, as the case may
be;
(b) redeem or purchase or make any capital distribution in respect of CN
Non-voting Equity Shares, CN Special Limited Voting Shares or any
other shares ranking junior to the CN Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation ranking equally
with the CN Exchangeable Shares with respect to the payment of
dividends or on dissolution, liquidation or winding-up; or
(d) issue any CN Exchangeable Shares or any other shares of the
Corporation ranking equally with, or superior to, the CN Exchangeable
Shares other than by way of stock dividends of CN Stapled Units to the
holders of such CN Exchangeable Shares.
Section 4.2 Except as expressly provided in the Plan of Arrangement and in this
section 4.2, no CN Exchangeable Share shall be or shall be capable of being
issued, transferred, transmitted or otherwise alienated or disposed of
separately from and otherwise than as part of a CN Stapled Unit comprised of an
equal number of CN Voting Shares and CN Exchangeable Shares. Notwithstanding
the foregoing, the following issuances and transfers of CN Exchangeable Shares
otherwise than as part of a CN Stapled Unit are hereby expressly permitted:
(i) the issuances of CN Exchangeable Shares provided in Section 2.2 of the
Plan of Arrangement;
(ii) the transfers of CN Exchangeable Shares to NAR Subco and the
conversion thereof to CN Special Limited Voting Shares and CN Non-
voting Equity Shares provided in Section 2.2 of the Plan of
Arrangement;
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(iii) the redemption of CN Exchangeable Shares by CN upon a retraction of
the CN Exchangeable Shares in accordance with these share provisions;
and
(iv) the transfer of CN Exchangeable Shares to NAR Subco and/or Newco, as
applicable, pursuant to the exercise or deemed exercise of a
Retraction Call Right, the Liquidation Call Right, the Exchange Right
or the Automatic Exchange Rights in accordance with these share
provisions, the Plan of Arrangement and/or the Voting and Exchange
Trust Agreement, as applicable.
Without limiting the generality of the foregoing, CN shall be entitled to treat
the registered holder of CN Stapled Units (or, subject to such Person furnishing
such information as is described in subsection 77(4) of the CBCA or any
replacement or successor provision therefor, the executor, administrator, heir
or legal representative of the heirs, of the estate of a deceased holder, a
guardian, committee, trustee, curator or tutor representing a holder who is an
infant, an incompetent person or a missing person, or a liquidator of or a
trustee in bankruptcy for a holder) as the owner exclusively entitled to vote,
to receive notices, to receive dividends or other payments in respect of and
otherwise to exercise all the rights and powers of the owner of the CN
Exchangeable Shares represented by such CN Stapled Unit. For purposes of
establishing and maintaining the share register for the outstanding CN
Exchangeable Shares, CN and its Transfer Agent shall and shall be entitled, at
all times (subject only to the Liquidation Call Right, the Exchange Right and
the Automatic Exchange Rights and except where a holder of CN Stapled Units
representing CN Exchangeable Shares has submitted a Retraction Request in
respect of CN Exchangeable Shares represented by such CN Stapled Unit
certificate) to treat each registered holder of CN Stapled Units as the
registered holder of a number of CN Exchangeable Shares equal to the number of
CN Stapled Units held by such Person. A CN Stapled Unit certificate shall be
the security certificate, and the only security certificate, that a holder of CN
Exchangeable Shares shall be entitled to receive in respect of his or her
holding of CN Exchangeable Shares pursuant to the CBCA or otherwise.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
Section 5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, subject to the exercise
by NAR Subco of the Liquidation Call Right, a holder of CN Exchangeable Shares
shall be entitled, subject to applicable law, to receive from the assets of the
Corporation in respect of each CN Exchangeable Share held by such holder on the
effective date (the "Liquidation Date") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
among the holders of the CN Voting Shares, the CN Special Limited Voting Shares,
the CN Non-voting Equity Shares or any other shares ranking junior to the CN
Exchangeable Shares, an
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amount per share equal to the Current Market Price of a Newco Stapled Unit on
the last Business Day prior to the Liquidation Date (the "Liquidation Amount"),
which shall be satisfied in full by the Corporation causing to be delivered to
such holder one Newco Common Share, together with all declared and unpaid
dividends on each such CN Exchangeable Share held by such holder on any dividend
record date which occurred prior to the Liquidation Date.
Section 5.2 On or promptly after the Liquidation Date, and subject to the
exercise by NAR Subco of the Liquidation Call Right, the Corporation shall cause
to be delivered to the holders of the CN Exchangeable Shares the Liquidation
Amount for each such CN Exchangeable Share upon presentation and surrender of
the certificates representing the CN Stapled Units, together with such other
documents and instruments as may be required to effect a transfer of CN
Exchangeable Shares under the CBCA and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to the holders
of the CN Exchangeable Shares. Payment of the total Liquidation Amount for such
CN Exchangeable Shares shall be made by delivery to each holder, at the address
of the holder recorded in the securities register of the Corporation for the CN
Stapled Units or by holding for pick-up by the holder at the registered office
of the Corporation or at any office of the Transfer Agent as may be specified by
the Corporation by notice to the holders of the CN Stapled Units, on behalf of
the Corporation of certificates representing Newco Common Shares (which shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, claim or encumbrance) and a cheque of the Corporation payable
at par at any branch of the bankers of the Corporation in respect of the
remaining portion, if any, of the total Liquidation Amount (in each case less
any amounts withheld on account of tax required to be deducted and withheld
therefrom). On and after the Liquidation Date, the holders of the CN
Exchangeable Shares shall cease to be holders of such CN Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such CN
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time after the Liquidation Date to deposit or cause to be
deposited the total Liquidation Amount in respect of the CN Exchangeable Shares
represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account with any chartered
bank or trust company in Canada. Upon such deposit being made, the rights of the
holders of CN Exchangeable Shares after such deposit shall be limited to
receiving their proportionate part of the total Liquidation Amount (in each case
less any amounts withheld on account of tax required to be deducted and withheld
therefrom) for such CN Exchangeable Shares so deposited, against presentation
and surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of the
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total Liquidation Amount, the holders of the CN Exchangeable Shares shall
thereafter be considered and deemed for all purposes to be holders of the Newco
Common Shares delivered to them or the custodian on their behalf.
Section 5.3 After the Corporation has satisfied its obligations to pay the
holders of the CN Exchangeable Shares the Liquidation Amount per CN Exchangeable
Share pursuant to section 5.1 of these share provisions, such holders shall not
be entitled to share in any further distribution of the assets of the
Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
Section 6.1 A holder of CN Exchangeable Shares shall be entitled at any time,
subject to the exercise by NAR Subco of the Retraction Call Right and otherwise
upon compliance with the provisions of this Article 6, to require the
Corporation to redeem any or all of the CN Exchangeable Shares registered in the
name of such holder for an amount per share equal to the Current Market Price of
a Newco Stapled Unit on the last Business Day prior to the Retraction Date (the
"Retraction Price"), which shall be satisfied in full by the Corporation
causing to be issued to such holder one Newco Common Share for each CN
Exchangeable Share presented and surrendered by the holder, together with, on
the payment date therefor, the full amount of all declared and unpaid dividends
on any such CN Exchangeable Share held by such holder on any dividend record
date which occurred prior to the Retraction Date. To effect such redemption, the
holder shall present and surrender at the registered office of the Corporation
or at any office of the Transfer Agent as may be specified by the Corporation by
notice to the holders of CN Stapled Units the certificate or certificates
representing the CN Stapled Units in respect of which the holder desires to have
the Corporation redeem the CN Exchangeable Shares forming part thereof, together
with such other documents and instruments as may be required to effect a
transfer of CN Stapled Units under the CBCA and the by-laws of the Corporation
and such additional documents and instruments as the Transfer Agent may
reasonably require, and together with a duly executed statement (the
"Retraction Request") in the form of Schedule A hereto or in such other form
as may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number specified
therein of the CN Exchangeable Shares represented by such CN Stapled
Unit certificate or certificates (the "Retracted Shares") redeemed by
the Corporation;
(b) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than 10 Business
Days nor more than 15 Business Days after the date on which the
Retraction Request is received by the Corporation and further provided
that, in the event that no such Business Day is specified by the
holder in the Retraction Request, the Retraction Date shall be deemed
to be
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the 15th Business Day after the date on which the Retraction Request
is received by the Corporation; and
(c) acknowledging the overriding right (the "Retraction Call Right") of
NAR Subco to purchase all but not less than all the Retracted Shares
directly from the holder and that the Retraction Request shall be
deemed to be a revocable offer by the holder to sell the Retracted
Shares to NAR Subco in accordance with the Retraction Call Right on
the terms and conditions set out in section 6.3 below.
Section 6.2 Subject to the exercise by NAR Subco of the Retraction Call Right,
upon receipt by the Corporation or the Transfer Agent in the manner specified in
section 6.1 hereof of a CN Stapled Unit certificate or certificates representing
the number of CN Exchangeable Shares which the holder desires to have the
Corporation redeem, together with a Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
section 6.7, the Corporation shall redeem the Retracted Shares effective at the
close of business on the Retraction Date and shall cause to be delivered to such
holder the total Retraction Price with respect to such shares, provided that all
declared and unpaid dividends for which the record date has occurred prior to
the Retraction Date shall be paid on the payment date for such dividends. If
only a part of the CN Exchangeable Shares represented by any CN Stapled Unit
certificate is redeemed (or purchased by NAR Subco pursuant to the Retraction
Call Right), a new certificate for the balance of such CN Stapled Units shall be
issued to the holder at the expense of the Corporation.
Section 6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify Newco and NAR Subco thereof. In order to
exercise the Retraction Call Right, NAR Subco must notify the Corporation of its
determination to do so (the "NAR Subco Call Notice") within five Business Days
of notification to NAR Subco by the Corporation of the receipt by the
Corporation of the Retraction Request. If NAR Subco does not so notify the
Corporation within such five Business Day period, the Corporation will notify
the holder as soon as possible thereafter that NAR Subco will not exercise the
Retraction Call Right. If NAR Subco delivers the NAR Subco Call Notice within
such five Business Day period, and provided that the Retraction Request is not
revoked by the holder in the manner specified in section 6.7, the Retraction
Request shall thereupon be considered only to be an offer by the holder to sell
the Retracted Shares to NAR Subco in accordance with the Retraction Call Right.
In such event, the Corporation shall not redeem the Retracted Shares and NAR
Subco shall purchase from such holder and such holder shall sell to NAR Subco on
the Retraction Date the Retracted Shares for a purchase price (the "Purchase
Price") per share equal to the Retraction Price per share, plus, on the
designated payment date therefor, to the extent not paid by the Corporation on
the designated payment date therefor, an additional amount equivalent to the
full amount of all declared and unpaid dividends on those Retracted Shares held
by such holder on any dividend record date which occurred prior to the
Retraction Date (the "Dividend Amount"). For the purposes of completing a
purchase pursuant to the
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Retraction Call Right, Newco, NAR Subco and the Corporation shall jointly cause
to be deposited with the Transfer Agent, on or before the Retraction Date,
certificates representing the requisite number of Newco Stapled Units and a
cheque or cheques of NAR Subco payable at par at any branch of the bankers of
NAR Subco representing the aggregate Dividend Amount, less any amounts withheld
on account of tax required to be deducted and withheld therefrom. Provided that
Newco and NAR Subco have complied with the immediately preceding sentence, the
closing of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no redemption by the
Corporation of such Retracted Shares shall take place on the Retraction Date. In
the event that NAR Subco does not deliver a NAR Subco Call Notice within such
five Business Day period, and provided that the Retraction Request is not
revoked by the holder in the manner specified in section 6.7, the Corporation
shall redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
Section 6.4 The Corporation, Newco or NAR Subco, as applicable, shall deliver or
cause the Transfer Agent to deliver to the relevant holder, at the address of
the holder recorded in the securities register of the Corporation for the CN
Stapled Units comprising such CN Exchangeable Shares or at the address specified
in the holder's Retraction Request or by holding for pick-up by the holder at
the registered office of the Corporation or at any office of the Transfer Agent
as may be specified by the Corporation by notice to the holders of CN Stapled
Units, certificates representing the requisite number of Newco Stapled Units
(the Newco Common Shares included in which shares shall be duly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance) registered in the name of the holder or in such other name as the
holder may request, and, if applicable and on or before the payment date
therefor, a cheque payable at par at any branch of the bankers of the
Corporation or NAR Subco, as applicable, representing the aggregate Dividend
Amount in payment of the total Retraction Price or the total Purchase Price, as
the case may be, in each case, less any amounts withheld on account of tax
required to be deducted and withheld therefrom, and such delivery of such
certificates and cheques on behalf of the Corporation or by NAR Subco, as the
case may be, or by the Transfer Agent shall be deemed to be payment of and shall
satisfy and discharge all liability for the total Retraction Price or total
Purchase Price, as the case may be, to the extent that the same is represented
by such share certificates and cheques (plus any tax deducted and withheld
therefrom and remitted to the proper tax authority).
Section 6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall cease to be a holder of such Retracted
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive his proportionate part of the
total Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made as provided in section 6.4, in which case
the rights of such holder shall remain
<PAGE>
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unaffected until the total Retraction Price or the total Purchase Price, as the
case may be, has been paid in the manner hereinbefore provided. On and after the
close of business on the Retraction Date, provided that presentation and
surrender of certificates and payment of the total Retraction Price or the total
Purchase Price, as the case may be, has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so redeemed by the
Corporation or purchased by NAR Subco shall thereafter be considered and deemed
for all purposes to be a holder of the Newco Common Shares represented by the
Newco Stapled Unit certificates delivered to such holder.
Section 6.6 Notwithstanding any other provision of this Article 6, the
Corporation shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that NAR Subco shall not have
exercised the Retraction Call Right with respect to the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to solvency requirements or
other provisions of applicable law, the Corporation shall redeem Retracted
Shares in accordance with section 6.2 of these share provisions on a pro rata
basis and shall issue to each holder of Retracted Shares a new CN Stapled Unit
certificate, at the expense of the Corporation, representing both the Retracted
Shares not redeemed by the Corporation pursuant to section 6.2 hereof and a
corresponding number of CN Voting Shares. Provided that the Retraction Request
is not revoked by the holder in the manner specified in section 6.7, the holder
of any such Retracted Shares not redeemed by the Corporation pursuant to section
6.2 of these share provisions as a result of solvency requirements or other
provisions of applicable law shall be deemed by giving the Retraction Request to
have instructed the Trustee to require NAR Subco to purchase such Retracted
Shares from such holder on the Retraction Date or as soon as practicable
thereafter on payment by NAR Subco to such holder of the Purchase Price for each
such Retracted Share, all as more specifically provided in the Voting and
Exchange Trust Agreement.
Section 6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request, in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to NAR Subco shall be deemed to have been revoked.
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ARTICLE 7
PURCHASE FOR CANCELLATION
Section 7.1 Subject to applicable law and the articles of the Corporation, the
Corporation may at any time and from time to time purchase for cancellation all
or any part of the outstanding CN Exchangeable Shares together with a
corresponding number of CN Voting Shares at any price by tender to all the
holders of record of CN Exchangeable Shares and CN Voting Shares represented by
CN Stapled Units then outstanding or through the facilities of any stock
exchange on which the CN Exchangeable Shares and CN Voting Shares represented by
CN Stapled Units are listed or quoted at any price per share together with an
amount equal to all declared and unpaid dividends thereon for which the record
date has occurred prior to the date of purchase. If in response to an invitation
for tenders under the provisions of this section 7.1, more CN Exchangeable
Shares and CN Voting Shares represented by CN Stapled Units are tendered at a
price or prices acceptable to the Corporation than the Corporation is prepared
to purchase, the CN Exchangeable Shares and CN Voting Shares represented by CN
Stapled Units to be purchased by the Corporation shall be purchased as nearly as
may be pro rata according to the number of shares tendered by each holder who
submits a tender to the Corporation, provided that when CN Exchangeable Shares
and CN Voting Shares represented by CN Stapled Units are tendered at different
prices, the pro rating shall be effected (disregarding fractions) only with
respect to the CN Exchangeable Shares and CN Voting Shares represented by CN
Stapled Units tendered at the price at which more CN Exchangeable Shares and CN
Voting Shares represented by CN Stapled Units were tendered than the Corporation
is prepared to purchase after the Corporation has purchased all the CN
Exchangeable Shares and CN Voting Shares represented by CN Stapled Units
tendered at lower prices. If part only of the CN Exchangeable Shares and CN
Voting Shares represented by CN Stapled Units represented by any certificate
shall be purchased, a new certificate for CN Stapled Units representing the
balance of such CN Exchangeable Shares and CN Voting Shares not purchased shall
be issued at the expense of the Corporation.
ARTICLE 8
VOTING RIGHTS
Section 8.1 Except as required by applicable law and by Article 10 hereof, the
holders of the CN Exchangeable Shares, as such, shall not be entitled to receive
notice of or to attend any meeting of the shareholders of the Corporation or to
vote at any such meeting.
ARTICLE 9
AMENDMENT AND APPROVAL
Section 9.1 The rights, privileges, restrictions and conditions attaching to the
CN Exchangeable Shares may be added to, changed or removed but only with the
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approval of the holders of the CN Exchangeable Shares given as hereinafter
specified.
Section 9.2 In addition to any other approval required by the CBCA or other
applicable law, any approval given by the holders of the CN Exchangeable Shares
to add to, change or remove any right, privilege, restriction or condition
attaching to the CN Exchangeable Shares or any other matter requiring the
approval or consent of the holders of the CN Exchangeable Shares shall be deemed
to have been sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such approval be evidenced
by resolution passed by not less than two-thirds of the votes cast on such
resolution (excluding any votes cast on such resolution in respect of CN
Exchangeable Shares held by or on behalf of CN, Newco, NAR Subco or any of their
respective Affiliates) at a meeting of holders of CN Exchangeable Shares duly
called and held in accordance with the By-laws of the Corporation.
ARTICLE 10
RECIPROCAL CHANGES, ETC. IN RESPECT OF NEWCO COMMON SHARES
Section 10.1 Each holder of a CN Exchangeable Share acknowledges that the Co-
operation Agreement provides, in part, that Newco will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with section 9.2 of these share
provisions:
(a) issue or distribute Newco Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire Newco Common
Shares) to the holders of all or substantially all of the then
outstanding Newco Common Shares by way of stock dividend or other
distribution, other than an issue of Newco Common Shares to holders of
Newco Common Shares who exercise an option to receive dividends in
Newco Common Shares represented by Newco Stapled Units in lieu of
receiving cash dividends;
(b) issue or distribute rights, options or warrants to the holders of all
or substantially all of the then outstanding Newco Common Shares
entitling them to subscribe for or to purchase Newco Common Shares and
CN Voting Shares represented by Newco Stapled Units; or
(c) issue or distribute to the holders of all or substantially all of the
then outstanding Newco Common Shares:
(i) shares or securities of Newco of any class other than Newco
Common Shares;
(ii) rights, options or warrants other than those referred to in
section 10.1(b) above;
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(iii) evidences of indebtedness of Newco; or
(iv) assets of Newco,
unless, in the case of paragraphs 10.1(a) and (b) above a corresponding issue or
distribution of CN Exchangeable Shares and CN Voting Shares comprising CN
Stapled Units or CN Rights complying with the requirements of paragraphs 3.1(b)
or (c), as applicable, is made or, in the case of paragraph 10.1(c), the
economic equivalent on a per share basis of such other shares or securities,
rights, options, warrants, evidences of indebtedness or other assets is issued
or distributed simultaneously to holders of the CN Exchangeable Shares or
unless, in the case of a stock dividend payable in Newco Common Shares
represented by Newco Stapled Units, in lieu of such a stock dividend the
Corporation effects a corresponding and contemporaneous subdivision of the
outstanding CN Exchangeable Shares and CN Voting Shares.
Section 10.2 Each holder of a CN Exchangeable Share acknowledges that the Co-
operation Agreement further provides, in part, that Newco will not without the
prior approval of the Corporation and the prior approval of the holders of the
CN Exchangeable Shares given in accordance with section 9.2 of these share
provisions:
(a) subdivide, redivide or change the then outstanding Newco Common Shares
into a greater number of Newco Common Shares;
(b) reduce, combine, consolidate or change the then outstanding Newco
Common Shares into a lesser number of Newco Common Shares; or
(c) reclassify or otherwise change the Newco Common Shares or effect an
amalgamation, merger, reorganization or other transaction affecting
the Newco Common Shares,
unless the same in the case of paragraph (a) and (b) above or, in the case of
paragraph (c) above, the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the CN
Exchangeable Shares and the CN Voting Shares. The Co-operation Agreement further
provides, in part, that the aforesaid provisions of the Co-operation Agreement
shall not be changed without the approval of the holders of the CN Exchangeable
Shares given in accordance with section 9.2 of these share provisions.
Section 10.3 The Corporation shall not:
(a) subdivide, redivide or change the then outstanding CN Exchangeable
Shares into a greater number of CN Exchangeable Shares; or
(b) reduce, combine, consolidate or change the then outstanding CN
Exchangeable Shares into a lesser number of CN Exchangeable Shares;
unless the same change shall simultaneously be made to the CN Voting Shares.
<PAGE>
-18-
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER CO-OPERATION AGREEMENT
Section 11.1 The Corporation will take all such actions and do all such things
as shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by Newco, NAR Subco and the Corporation with all
provisions of the Co-operation Agreement applicable to Newco, NAR Subco and the
Corporation, respectively, in accordance with the terms thereof including,
without limitation, taking all such actions and doing all such things as shall
be necessary or advisable to enforce to the fullest extent possible for the
direct benefit of the Corporation all rights and benefits in favour of the
Corporation under or pursuant to such agreement.
ARTICLE 12
LEGEND; CALL RIGHTS
Section 12.1 The certificates evidencing the CN Exchangeable Shares shall
contain or have affixed thereto a legend in form and on terms approved by the
Board of Directors, with respect to the Co-operation Agreement, the provisions
of the Plan of Arrangement relating to the Liquidation Call Right and the Voting
and Exchange Trust Agreement (including the provisions with respect to the
voting rights and exchange rights thereunder).
Section 12.2 Each holder of a CN Exchangeable Share, whether of record or
beneficial, by virtue of becoming and being such a holder shall be deemed to
acknowledge each of the Liquidation Call Right and the Retraction Call Right, in
each case, in favour of NAR Subco, and the overriding nature thereof in
connection with the liquidation, dissolution or winding-up of the Corporation or
the retraction of CN Exchangeable Shares, as the case may be, and to be bound
thereby in favour of NAR Subco as therein provided.
ARTICLE 13
AUTOMATIC CONVERSION
Section 13.1 Immediately upon the acquisition by NAR Subco or Newco of any CN
Exchangeable Shares pursuant to any exercise of the Liquidation Call Right, the
Exchange Right, the Retraction Call Right or the Automatic Exchange Rights, each
CN Exchangeable Share so acquired shall automatically convert into and become,
and shall be deemed for all purposes to have converted into and become, without
any further act or formality, one (1) CN Non-voting Equity Share and any and all
CN Stapled Unit certificates delivered in connection therewith shall be
surrendered to the Corporation and CN shall issue to NAR Subco or Newco, as
applicable, a certificate or certificates representing the CN Non-voting Equity
Shares to which NAR Subco or Newco, as applicable, is entitled upon such
conversion.
<PAGE>
-19-
ARTICLE 14
REDEMPTION AND SALE
Section 14.1 The Corporation may for the purpose of enforcing the constraint
imposed upon any voting shares pursuant to section 2 of Exhibit "I", redeem any
CN Exchangeable Shares comprising CN Stapled Units which represent voting shares
that are owned, or that the directors determine may be owned, by any person or
persons contrary to such constraint, upon payment to the holder thereof of the
sum of $0.01 per share plus the net proceeds of sale, if any, from the reissue
and sale of an equal number of CN Stapled Units representing CN Exchangeable
Shares and CN Voting Shares. Such redemption, reissuance and sale shall be
conducted in accordance with the procedures set forth in Part VI of the CBCA and
Part VII of the CBCA Regulations, with necessary modifications, as if such
provisions applied to the redemption, reissuance and sale of such CN
Exchangeable Shares and the net proceeds of such reissuance and sale shall be
remitted to the person or persons entitled thereto in accordance with such
provisions.
ARTICLE 15
NOTICES
Section 15.1 Any notice, request or other communication to be given to the
Corporation by a holder of CN Exchangeable Shares shall be in writing and shall
be valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Corporation and addressed to the
attention of .. Any such notice, request or other communication, if given by
mail, telecopy or delivery, shall only be deemed to have been given and received
upon actual receipt thereof by the Corporation.
Section 15.2 Any presentation and surrender by a holder of Exchangeable Shares
to the Corporation or the Transfer Agent of certificates representing CN
Exchangeable Shares in connection with the liquidation, dissolution or winding-
up of the Corporation or the retraction of CN Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the registered office of
the Corporation or to such office of the Transfer Agent as may be specified by
the Corporation, in each case, addressed to the attention of . of the
Corporation. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
Section 15.3 Any notice, request or other communication to be given to a holder
of CN Exchangeable Shares by or on behalf of the Corporation shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
delivery to the address of the holder of the corresponding CN Stapled Units
recorded in the securities register of the Corporation or, in the event of the
address of any such holder not being so recorded, then at the last known address
of such holder. Any
<PAGE>
-20-
such notice, request or other communication, if given by mail, shall be deemed
to have been given and received on the third Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of CN Exchangeable
Shares shall not invalidate or otherwise alter or affect any action or
proceeding to be taken by the Corporation pursuant thereto.
<PAGE>
SCHEDULE A
NOTICE OF RETRACTION
To Canadian National Railway Company ("CN")
North American Railways, Inc. ("Newco")
and
[NAR Holdings Company] ("NAR Subco")
This notice is given pursuant to Article 6 of the provisions (the "Share
Provisions") attaching to the CN Exchangeable Shares of CN represented by this
CN Stapled Unit certificate and all capitalized words and expressions used in
this notice that are defined in the Share Provisions have the meanings ascribed
to such words and expressions in such Share Provisions.
The undersigned hereby notifies CN that, subject to the Retraction Call
Right referred to below, the undersigned desires to have CN redeem in accordance
with Article 6 of the Share Provisions:
[_] all CN Exchangeable Share(s) represented by this CN Stapled Unit
certificate; or
[_] __________________ CN Exchangeable Share(s) only.
The undersigned hereby notifies CN that the Retraction Date shall be
_______________________.
NOTE: The Retraction Date must be a Business Day and must not be less than 10
Business Days nor more than 15 Business Days after the date upon which
this notice is received by CN. If no such Business Day is specified
above, the Retraction Date shall be deemed to be the 15th Business Day
after the date on which this notice is received by CN.
The undersigned acknowledges the overriding Retraction Call Right of NAR
Subco to purchase all but not less than all the Retracted Shares from the
undersigned and that this notice is and shall be deemed to be a revocable offer
by the undersigned to sell the Retractable Shares to NAR Subco in accordance
with the Retraction Call Right on the Retraction Date for the Purchase Price and
on the other terms and conditions set out in section 6.3 of the Share
Provisions. This notice of retraction, and this offer to sell the Retracted
Shares to NAR Subco may be revoked and withdrawn by the undersigned only by
notice in writing given to CN at any time before the close of business on the
Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions of
applicable law, CN is unable to redeem all Retracted Shares, the undersigned
will be deemed to have exercised the Exchange Right (as defined in the Voting
and
<PAGE>
-2-
Exchange Trust Agreement) so as to require NAR Subco to purchase the unredeemed
Retracted Shares.
The undersigned hereby represents and warrants to Newco, NAR Subco and CN
that the undersigned:
[_] is
(select one)
[_] is not
a non-resident of Canada for purposes of the Income Tax Act (Canada). The
undersigned acknowledges that in the absence of an indication that the
undersigned is not a non-resident of Canada, withholding on account of Canadian
tax may be made from amounts payable to the undersigned on the redemption or
purchase of the Retracted Shares.
The undersigned hereby represents and warrants to Newco, NAR Subco and CN
that the undersigned has good title to, and owns, the share(s) represented by
this CN Stapled Unit certificate to be acquired by NAR Subco or CN, as the case
may be, free and clear of all liens, claims and encumbrances.
________________ __________________________ ____________________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
[_] Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up
by the shareholder from the Transfer Agent, failing which the securities
and any cheque(s) will be mailed to the last address of the shareholder as
it appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited
with the Transfer Agent. The securities and any cheque(s) resulting from
the retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name of the
shareholder as it appears on the register of CN and the securities and any
cheque(s) resulting from such retraction or purchase will be delivered to
such shareholder as indicated above, unless the form appearing immediately
below is duly completed.
Date: _______________________________
Name of Person in Whose Name Securities or Cheque(s)
Are to be Registered, Issued or Delivered (please print): _____________________
Street Address or P.O. Box: ___________________________________________________
<PAGE>
-3-
Signature of Shareholder: _____________________________________________________
City, Province and Postal Code: _______________________________________________
Signature Guaranteed by: ______________________________________________________
NOTE: If this notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the remaining
share(s) of CN represented by this certificate will be issued and
registered in the name of the shareholder as it appears on the register of
CN, unless the Share Transfer Power on the share certificate is duly
completed in respect of such share(s).
<PAGE>
APPENDIX III
PROVISIONS ATTACHING TO THE
CN SPECIAL LIMITED VOTING SHARES
The CN Special Limited Voting Shares shall have attached thereto the
following rights, privileges, restrictions and conditions:
1. No Dividends Rights
1.1 The holders of the CN Special Limited Voting Shares, as such, shall not be
entitled to receive any dividends.
2. Dissolution
2.1 In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary of involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding up
its affairs, subject to the prior rights of the holders of the Preference
Shares, the CN Exchangeable Shares, the CN Voting Shares and of any other shares
ranking senior to the CN Special Limited Voting Shares with respect to priority
in the distribution of assets upon dissolution, liquidation or winding-up but
before any amount shall be paid to or any assets distributed among the holders
of CN Non-voting Equity Shares, or the holders of any other class of shares of
the Corporation ranking subordinate to the CN Special Limited Voting Shares, the
holder of the CN Special Limited Voting Shares shall be entitled to receive the
sum of U.S.$0.05 per CN Special Limited Voting Share. After payment to the
holders of the CN Special Limited Voting Shares of such amount, the holders of
the CN Special Limited Voting Share shall not be entitled to share in any
further distribution of the assets of the Corporation.
3. Limited Voting Rights
3.1 The holders of the CN Special Limited Voting Shares shall be entitled to
receive notice of and to attend all meetings of the shareholders of the
Corporation and shall be entitled to a number of votes equal, in the aggregate,
to the Applicable Number (and equal, per CN Special Limited Voting Share, to the
Applicable Number divided by the number of then outstanding CN Special Limited
Voting Shares) at any such meeting and on any matter voted on at such meeting,
except for meetings at which and matters on which only holders of another
specified class or series of shares of the Corporation are entitled to vote
separately as a class or series. For these purposes, the Applicable Number
shall be a number of votes equal to ten and one-tenth per cent (10.1%) of the
total number of votes entitled to be cast by the holders of the outstanding CN
Voting Shares and the holders of the CN Special Limited Voting Shares at such
meeting and on such matter calculated in accordance with the following formula:
<PAGE>
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AN = Applicable Number
NVS = Number of votes attached to outstanding CN Voting Shares
AN = [0.101 multiplied by NVS
-----
0.899]
<PAGE>
APPENDIX IV
PROVISIONS ATTACHING TO THE
CN NON-VOTING EQUITY SHARES
The CN Non-voting Equity Shares shall have attached thereto the following
rights, privileges, restrictions and conditions:
1. Dividends
1.1 Subject to the rights, privileges, restrictions and conditions attaching to
the CN Exchangeable Shares, the Preference Shares and to the shares of any other
class of the Corporation ranking prior to the CN Non-voting Equity Shares, the
holders of the CN Non-voting Equity Shares shall be entitled, in the discretion
of the directors, to receive, out of amounts applicable to the payment of
dividends, any dividends declared and payable by the Corporation on the CN Non-
voting Equity Shares.
2. Dissolution
2.1 In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary of involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding up
its affairs, subject to the prior rights of the holders of the Preference
Shares, the CN Exchangeable Shares, the CN Voting Shares, the CN Special Limited
Voting Shares and any other shares ranking senior to the CN Non-voting Equity
Shares with respect to priority in the distribution of assets upon dissolution,
liquidation or winding-up, the holders of the CN Non-voting Equity Shares shall
be entitled to receive the remaining assets of the Corporation and shall be
entitled to share equally, share for share, in all distributions of such assets.
3. No Voting Rights
3.1 Except as required by applicable law, the holders of the CN Non-voting
Equity Shares, as such, shall not be entitled to receive notice of or to attend
any meeting of the shareholders of the Corporation or to vote at any such
meeting.
<PAGE>
APPENDIX V
AMENDMENTS TO THE BY-LAWS OF CN
The English language version of By-Law No.1 of CN shall be amended as
follows with a corresponding amendment to be made to the French language
version:
1. Additional Definitions
----------------------
Section 1.1 of the By-Law is amended by inserting, in appropriate
alphabetical order, the following additional defined terms:
"annual meeting of shareholders" means an annual meeting of shareholders
entitled to vote to elect, and which is held to elect, the directors of the
Corporation;
"share certificate" includes a unit certificate representing voting shares
and non-voting exchangeable preferred shares which may not be transferred,
transmitted, alienated or otherwise disposed of separately except as
provided in the articles;
"voting shares" has the meaning ascribed to such term in the CN
Commercialization Act and "voting shareholders" has a correlative meaning;"
2. Amendment to Definitions
------------------------
The definition of the term "articles" in section 1.1 of the By-Law shall be
replaced with the following definition:
"articles" means the articles of arrangement attached to the certificate
of arrangement dated . of the Corporation as from time to time amended or
restated;"
3. References to Voting Shares
---------------------------
Section 4.3 of the By-Law is amended by deleting the reference to
"shareholders" in the third to last sentence thereof and replacing it with the
term "voting shareholders". Section 4.4 of the By-Law is amended by deleting
the reference to "shareholders" in such section and replacing it with the term
"voting shareholders". Section 4.6 of the By-Law is amended by deleting the
reference to "shareholders" in the second sentence thereof and replacing it with
the term "voting shareholders".
<PAGE>
EXHIBIT "I"
1. Definitions
-----------
1.1 For the purpose of this Exhibit "I", the following terms have the following
meanings:
"Act" means An Act to provide for the continuance of the Canadian National
Railway Company under the Canada Business Corporations Act and for the
issuance and sale of shares of the Company to the public, S.C. 1995, c.24
enacted on July 13, 1995;
"Aggregate Votes" means the aggregate of the votes attached to all voting
shares of the Corporation that may ordinarily be cast to elect directors of
the Corporation;
"associate" has the meaning set out in Section 6 of this Exhibit "I";
"CBCA Regulations" means the Canada Business Corporations Regulations;
"control" has the meaning set out in Section 7 of this Exhibit "I";
"corporation" includes a body corporate, partnership and unincorporated
organization;
"Maximum Individual Holdings" means voting shares to which are attached
fifteen percent (15%) of the Aggregate Votes;
"Minister" means the Minister of Transport or such other member of the
Queen's Privy Council for Canada as may be designated by the Governor in
Council as the Minister for the purposes of the Act;
"Ownership Rights" means, with respect to voting shares of the Corporation,
all rights attaching thereto, including the rights to vote at any meeting
of shareholders, to receive any dividends declared thereon by the
Corporation, and to receive the remaining property of the Corporation upon
liquidation, dissolution or winding-up of the Corporation (but does not
include the right to receive proceeds of sale pursuant to Section 5 of this
Exhibit "I");
"person" includes an individual, corporation, government, government
agency, trustee, executor, administrator and other legal representative;
and
"voting share" means a share of the Corporation carrying voting rights
under all circumstances or under some circumstances that have occurred and
are continuing, and includes a security currently convertible into such a
share and currently exercisable options and rights to acquire such a share
or such a convertible security.
<PAGE>
-2-
1.2 All terms used in this Exhibit "I" which are not defined in these Articles
of Arrangement but are defined in the Act or the CBCA have the meaning ascribed
thereto in the Act or the CBCA respectively, provided that in the event of any
inconsistency between a definition contained in the Act and a definition
contained in the CBCA, the definition contained in the Act shall prevail. Any
provision of this Exhibit "I" which may be read in a manner that is inconsistent
with the Act shall be read so as to be consistent therewith.
2. Constraints on Issue and Transfer
---------------------------------
The Corporation shall not:
(a) accept any subscription for its voting shares;
(b) issue any of its voting shares; or
(c) register or otherwise recognize the transfer of any of its voting
shares;
if, as a result of such subscription, issue, transfer, purchase or acquisition,
voting shares to which are attached more than fifteen percent (15%) of the
Aggregate Votes are or would be held, beneficially owned or controlled, directly
or indirectly, by any one person together with the associates of such person.
3. Constraints on Ownership Rights
-------------------------------
No person, together with his or her associates, shall hold, beneficially
own or control, directly or indirectly, voting shares to which are attached more
than fifteen (15%) of the Aggregate Votes. Subject to Subsections 4.1 and 4.2,
the Corporation shall refuse to recognize all Ownership Rights that would
otherwise be attached to any voting shares held, beneficially owned or
controlled, directly or indirectly, in excess of the permitted Maximum
Individual Holdings by any person, together with such person's associates.
4. Limitation on Voting Rights and dividend forfeiture
---------------------------------------------------
4.1 Where the total number of voting shares held, beneficially owned or
controlled, directly or indirectly, by any one person together with his or her
associates exceeds the Maximum Individual Holdings, no person shall, in person
or by proxy, exercise the voting rights attached to the voting shares held,
beneficially owned or controlled, directly or indirectly, by such person or his
or her associates. If the Corporation redeems, purchases for cancellation or
otherwise acquires voting shares, and the result of such action is that any
person and the associates of that person who, prior to such action, were not in
contravention of the Maximum Individual Holdings are, after such action, in
contravention, then, notwithstanding any other provision of this Exhibit "I",
the sole consequence of such action to that person and the associates of that
person, in respect of the voting shares of that person and of the associates of
that person held, beneficially owned or controlled at the time of such action,
shall be that the number of votes attached to those voting
<PAGE>
-3-
shares shall be reduced to a number that is the largest whole number of votes
that may be attached to the voting shares which that person and the associates
of that person could hold, beneficially own or control from time to time in
accordance with the Maximum Individual Holdings.
4.2 Where the total number of voting shares held, beneficially owned or
controlled, directly or indirectly, by any one person together with his or her
associates exceeds the Maximum Individual Holdings, the percentage of any and
all dividends attributable to the percentage of voting shares exceeding the
Maximum Individual Holding shall be forfeited including any cumulative dividend
and the amount of dividend so forfeited shall not become payable thereafter to
any person for any reason whatsoever provided that notwithstanding any other
provision of this Exhibit "I":
(a) the directors of the Corporation may determine to pay a dividend or to
make any other distribution on voting shares that would otherwise be
prohibited by any other provision of this Exhibit "I" where the
contravention of the Maximum Individual Holdings that gave rise to the
prohibition was inadvertent or of a technical nature or it would
otherwise be inequitable not to pay the dividend or make the
distribution; and
(b) where a dividend has not been paid or any other distribution has not
been made on voting shares of a person as a result of a directors'
determination of a contravention of the Maximum Individual Holdings,
the directors of the Corporation shall declare and pay the dividend or
make the distribution to the relevant person if they subsequently
determine that no such contravention occurred.
4.3 Notwithstanding any other provision of this Exhibit "I", a contravention of
the Maximum Individual Holdings shall have no consequences except those that are
expressly provided for in this Exhibit "I". For greater certainty but without
limiting the generally of the foregoing:
(a) no transfer, issue or ownership of, and no title to, voting shares;
(b) no resolution of shareholders; and
(c) no act of the Corporation, including any transfer of property to or by
the Corporation;
shall be invalid or otherwise affected by any contravention of the Maximum
Individual Holdings.
5. Sale of Constrained Shares
--------------------------
Without limiting any of the provisions of this Exhibit "I" the Corporation
(but subject to Subsection 4.1) may, for the purposes of enforcing any
constraint imposed
<PAGE>
-4-
pursuant to Section 2 above, sell, as if it were the owner thereof, any voting
shares that are owned, or that the directors determine may be owned, by any
person or persons, contrary to such constraint. Such sale shall be conducted in
accordance with the procedures set forth in Part VI of the CBCA and Part VII of
the CBCA Regulations with necessary modifications, as if such provisions applied
to the sale of such voting shares and the net proceeds of sale thereof shall be
remitted to the person or persons entitled thereto in accordance with such
provisions.
6. Associates
----------
6.1 For the purposes of this Exhibit "I", a person is an associate of another
person if:
(a) one is a corporation of which the other is an officer or director;
(b) one is a corporation that is controlled by the other or by a group of
persons of which the other is a member;
(c) one is a partnership of which the other is a partner;
(d) one is a trust of which the other is a trustee;
(e) both are corporations controlled by the same person;
(f) both are members of a voting trust that relates to voting shares;
(g) both, in the reasonable opinion of the directors of the Corporation,
are parties to an agreement or arrangement, a purpose of which is to
require them to act in concert with respect to their interests, direct
or indirect, in the Corporation or are otherwise acting in concert
with respect to those interests; or
(h) both are at the same time associates, within the meaning of any of
paragraphs (a) to (g), of the same person.
6.2 Notwithstanding Subsection 6.1, for the purposes of this section,
(a) where a person who, but for this Subsection 6.2, would be an associate
of another person submits to the Corporation a statutory declaration
or such other declaration required by the directors stating that:
(i) no voting shares held or to be held by the declarant are or will
be, to the declarant's knowledge, held in the right of, for the
use or benefit of or under the control of, any other person of
which, but for this paragraph, the declarant would be an
associate, and
(ii) the declarant is not acting and will not act in concert with any
such other person with respect to their interests, direct or
indirect, in the Corporation,
<PAGE>
-5-
the declarant and that other person are not associates so long as the
directors of the Corporation are satisfied that the statements in the
declaration are being complied with and that there are no other
reasonable grounds for disregarding the declaration;
(b) two corporations are not associates pursuant to Subsection 6.1 by
reason only that under Subsection 6.1 each is an associate of the same
individual; and
(c) where it appears from the central securities register of the
Corporation that any person holds, beneficially owns or controls
voting shares to which are attached not more than the lesser of two
one-hundredths of one percent of the votes that may ordinarily be cast
to elect directors of the Corporation and five thousand such votes,
that person is not an associate of anyone else and no one else is an
associate of that person.
6.3 For greater certainty, no person is presumed to be an associate of any
other person for purposes of paragraph 8(4)(g) of the Act solely by reason that
one of them has given the other the power to vote or direct the voting of voting
shares at a meeting of the holders of the voting shares pursuant to a revocable
proxy where the proxy is solicited solely by means of an information circular
issued in a public solicitation of proxies that is made in respect of all voting
shares and in accordance with applicable law.
7. Control
-------
For purposes of this Exhibit "I", "control" and any derivative thereof
means control in any manner that results in control in fact, whether directly
through the ownership of securities or indirectly through a trust, an agreement
or arrangement, the ownership of any body corporate or otherwise, and, without
limiting the generality of the foregoing:
(a) a body corporate is controlled by a person if:
(i) securities of the body corporate to which are attached more than
fifty percent (50%) of the votes that may be cast to elect
directors of the body corporate are held, otherwise than by way
of security only, by or for the benefit of that person; and
(ii) the votes attached to those securities are sufficient, if
exercised, to elect a majority of the directors of the body
corporate; and
(b) a partnership or unincorporated organization is controlled by a person
if an ownership interest therein representing more than fifty percent
(50%) of the assets of the partnership or organization is held,
otherwise than by way of security only, by or for the benefit of that
person.
8. Joint Ownership
---------------
<PAGE>
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8.1 For the purposes of this Exhibit "I", where voting shares are held,
beneficially owned or controlled by several persons jointly, the number of
voting shares held, beneficially owned or controlled by any one such person
shall include the number of voting shares held, beneficially owned or controlled
jointly with such other persons.
9. Exceptions
----------
9.1 Nothing in this Exhibit "I" shall be construed to apply in respect of
voting shares that:
(a) are held by the Minister in trust for Her Majesty in right of Canada;
(b) are held by one or more underwriters solely for the purpose of
distributing the shares to the public or in connection therewith which
shall include, without limitation, any voting shares acquired through
the exercise of an over-allotment option or in stabilization
transactions and, for the purposes of calculating the percentage of
voting shares of the Corporation held, beneficially owned or
controlled by any underwriter during the period of any distribution of
share (such period not terminating for the purposes of this provision
while any over-allotment option remains unexercised and unexpired),
shall not include any shares owned or subject to acquisition by such
underwriter which have at the time of such calculation been resold;
(c) are held by any person that is acting in relation to the shares solely
in its capacity as an intermediary in the payment of funds or the
delivery of securities or both, in connection with trades in
securities and that provides centralized facilities for the clearing
of trades in securities, including, without limitation, intermediaries
such as The Canadian Depositary for Securities Limited and the
Depository Trust Company;
(d) are held by way of security only; or
(e) are held by any custodian, depositary or other agent appointed under
an instalment receipt agreement or other agreement pursuant to which,
among other things, voting shares are purchased on an instalment
basis.
10. By-Laws
-------
10.1 Subject to the CBCA and the CBCA Regulations, the directors of the
Corporation may make, amend or repeal any by-laws required to administer the
constrained share provisions set out in these articles, including by-laws:
(a) to determine the circumstances in which any declarations are required,
their form and the times when they are to be furnished;
<PAGE>
-7-
(b) without limitation to paragraph (a), to require any person in whose
name voting shares are registered to furnish a statutory declaration
under the Canada Evidence Act declaring whether:
(i) the shareholder is the beneficial owner of the voting shares or
holds them for a beneficial owner; and
(ii) the shareholder is an associate of any other shareholder,
and declaring any further facts that the directors consider relevant;
and
(c) to require any person seeking to have a transfer of a voting share
registered in his or her name or to have a voting share issued to him
or her to furnish a declaration similar to the declaration a
shareholder may be required to furnish under paragraph (a) or (b).
10.2 Where a person is required to furnish a declaration pursuant to a by-law
made under Subsection 10.1 the directors may refuse to register a transfer of a
voting share in his or her name or to issue a voting share to him or her until
that person has furnished the declaration.
11. Powers of Directors
-------------------
11.1 In the administration of this Exhibit "I", the directors of the Corporation
shall enjoy, in addition to the powers set forth herein, all of the powers
necessary or desirable, in their opinion, to carry out the intent and purpose
hereof, including but not limited to all powers contemplated by the provisions
relating to constrained share corporations in Part VI of the CBCA and Part VII
of the CBCA Regulations, with necessary modifications, as if such provisions
applied to the sale of voting shares.
11.2 If the board of directors, acting in good faith, determines that any
persons are parties to an agreement or arrangement, a purpose of which is to
require them to act in concert with respect to their interest, direct or
indirect, in voting shares, the board of directors shall be entitled to treat
such persons as associates for the purposes hereof.
11.3 In administering the provisions of this Exhibit "I" the directors of the
Corporation may rely upon:
(a) a statement made in a declaration referred to in Section 10;
(b) the knowledge of a director, officer, employee or agent of the
Corporation; and
(c) the opinion of counsel to the Corporation or of other qualified
advisors.
11.4 Wherever in this Exhibit "I" it is necessary to determine the opinion of
the directors of the Corporation, such opinion shall be expressed and
conclusively
<PAGE>
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evidenced by a resolution of the directors of the Corporation duly adopted,
including a resolution in writing executed pursuant to Section 117 of the CBCA.
12. No Claims
---------
Neither any shareholder of the Corporation nor any other interested person
shall have any claim or action against any director or officer of the
Corporation nor shall the Corporation have any claim or action against any
director or officer of the Corporation arising out of any act (including any
omission to act) performed pursuant to or in intended pursuance of the
provisions of this Exhibit "I" or any breach or alleged breach of such
provisions provided that the directors shall have acted honestly and in good
faith.
13. Disclosure Required
-------------------
Each of the following documents issued or published by the Corporation
shall indicate conspicuously the general nature of the constraints on issue,
transfer and ownership of its voting shares contained herein:
(a) certificate representing a voting share;
(b) management proxy circular; and
(c) prospectus, statement of material facts, registration statement or
similar document.
<PAGE>
Exhibit "F"
FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the . day of . , 200..
B E T W E E N :
CANADIAN NATIONAL RAILWAY COMPANY, a corporation existing under
the laws of Canada,
(hereinafter referred to as "CN"),
OF THE FIRST PART,
- and -
NORTH AMERICAN RAILWAYS, INC., a corporation existing under the
laws of the State of Delaware,
(hereinafter referred to as "Newco"),
OF THE SECOND PART,
- and -
[NAR HOLDINGS COMPANY], an unlimited liability company existing
under the laws of the Province of Nova Scotia,
(hereinafter referred to as "NAR Subco"),
OF THE THIRD PART,
- and -
THE TRUST COMPANY OF THE BANK OF MONTREAL, a trust company
incorporated under the laws of Canada,
(hereinafter referred to as "Trustee"),
OF THE FOURTH PART.
WHEREAS pursuant to an amended and restated combination agreement (the
"Combination Agreement") dated as of December 18, 1999 among CN, Burlington
Northern Santa Fe Corporation ("BNSF"), Newco and Western Merger Sub, Inc., CN
and BNSF are to effect a business combination involving, among other things, the
recapitalization of CN through the issuance to its common shareholders of units
("CN Stapled Units") each comprised of one voting share (a "CN Voting Share")
and one exchangeable share (a "CN Exchangeable Share"), all pursuant to
<PAGE>
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the plan of arrangement (the "Plan of Arrangement") contemplated by the
Combination Agreement;
AND WHEREAS pursuant to the Combination Agreement CN and Newco have agreed
to execute a voting and exchange trust agreement substantially in the form of
this trust agreement;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this trust agreement and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions.
In this trust agreement, the following terms shall have the following
meanings:
"Affiliate" means an affiliated body corporate within the meaning of the CBCA.
"Arrangement" means the arrangement involving, among others, CN and its
shareholders contemplated by the Plan of Arrangement.
"Automatic Exchange Rights" means the benefit of the obligation of Newco to
effect the automatic exchange of Newco Common Shares for CN Exchangeable Shares
pursuant to section 5.12.
"Beneficiaries" means the registered holders from time to time of CN
Exchangeable Shares, represented by CN Stapled Units, other than CN, Newco and
their respective Affiliates.
"Beneficiary Votes" has the meaning ascribed thereto in section 4.2.
"Board of Directors" means the Board of Directors of CN.
"Business Day" means any day on which commercial banks are generally open for
business in New York, New York and Montreal, Quebec, other than a Saturday, a
Sunday or a day observed as a holiday in Montreal, Quebec under the laws of the
province of Quebec or the federal laws of Canada or in New York, New York under
the laws of the State of New York or the federal laws of the United States of
America.
"CN Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the CN Exchangeable Shares.
"CN Exchangeable Shares" means the non-voting exchangeable shares in the capital
of CN.
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"CN Stapled Unit" means a unit comprised of one CN Voting Share and one CN
Exchangeable Share, which unit does not constitute a security independent of the
shares it represents.
"CN Voting Shares" means the voting shares in the capital of CN.
"Canadian Dollar Equivalent" means, in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount") at any
date, the product obtained by multiplying (a) the Foreign Currency Amount by (b)
the noon spot exchange rate on such date for such foreign currency expressed in
Canadian dollars as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date for such foreign
currency expressed in Canadian dollars as may be deemed by the Board of
Directors to be appropriate for such purpose.
"Co-operation Agreement" means that certain co-operation agreement made as of
even date herewith between CN, Newco and NAR Subco.
"Current Market Price" means, in respect of a Newco Stapled Unit on any date,
the Canadian Dollar Equivalent of the average of the closing bid and asked
prices of Newco Stapled Units during a period of 20 consecutive trading days
ending not more than three trading days before such date on the New York Stock
Exchange, or, if the Newco Stapled Units are not then quoted on the New York
Stock Exchange, on such other stock exchange or automated quotation system on
which the Newco Stapled Units are listed or quoted, as the case may be, as may
be selected by the Board of Directors for such purpose; provided however, that
if in the opinion of the Board of Directors the public distribution or trading
activity of Newco Stapled Units during such period does not create a market
which reflects the fair market value of a Newco Stapled Unit, then the Current
Market Price of a Newco Stapled Unit shall be determined by the Board of
Directors, in good faith and in its sole discretion, and provided further that
any such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"Exchange Right" has the meaning ascribed thereto in section 5.1.
"Insolvency Event" means the institution by CN of any proceeding to be
adjudicated a bankrupt or insolvent or to be wound up, or the consent of CN to
the institution of bankruptcy, insolvency or winding-up proceedings against it,
or the filing of a petition, answer or consent seeking dissolution or winding-up
under any bankruptcy, insolvency or analogous laws, including without limitation
the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and
Insolvency Act (Canada), and the failure by CN to contest in good faith any such
proceedings commenced in respect of CN within 30 days of becoming aware thereof,
or the consent by CN to the filing of any such petition or to the appointment of
a receiver, or the making by CN of a general assignment for the benefit of
creditors, or the admission in writing by CN of its inability to pay its debts
generally as they become due, or CN not being permitted, pursuant to solvency
requirements of
<PAGE>
-4-
applicable law, to redeem any Retracted Shares pursuant to section 6.6 of the CN
Exchangeable Share Provisions.
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement.
"Liquidation Event" has the meaning ascribed thereto in paragraph 5.12(b).
"Liquidation Event Effective Date" has the meaning ascribed thereto in section
5.12(c).
"List" has the meaning ascribed thereto in section 4.6.
"NAR Subco" means [NAR Holdings Company] an unlimited liability company existing
under the laws of the Province of Nova Scotia and a wholly-owned subsidiary of
Newco.
"Newco Affiliates" means Affiliates of Newco, including without limitation NAR
Subco.
"Newco Common Share" means a share of common stock, par value U.S.$0.01 per
share, in the capital of Newco.
"Newco Consent" has the meaning ascribed thereto in section 4.2.
"Newco Meeting" has the meaning ascribed thereto in section 4.2.
"Newco Stapled Unit" means a unit comprised of one CN Voting Share and one Newco
Common Share, which unit does not constitute a security independent of the
shares it represents.
"Newco Successor" has the meaning ascribed thereto in paragraph 11.1(a).
"Officer's Certificate" means, with respect to CN, Newco or NAR Subco, as the
case may be, a certificate signed by any one director or officer of CN, Newco or
NAR Subco, as the case may be.
"person" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Plan of Arrangement" means the plan of arrangement of CN providing for the
Arrangement.
"Retracted Shares" has the meaning ascribed thereto in section 5.7.
"Retraction Call Right" has the meaning ascribed thereto in the CN Exchangeable
Share Provisions.
<PAGE>
-5-
"Special Voting Share" means the one share of special voting stock of Newco, par
value U.S. $0.01, which entitles the holder of record to a number of votes at
meetings of holders of Newco Common Shares equal to the number of CN
Exchangeable Shares outstanding from time to time (other than CN Exchangeable
Shares held by Newco and Newco Affiliates), which share is to be issued to,
deposited with, and voted by, the Trustee as described herein.
"Trust" means the trust created by this trust agreement.
"Trust Estate" means the Special Voting Share, any other securities, the
Exchange Right, the Automatic Exchange Rights and any money or other property
which may be held by the Trustee from time to time pursuant to this trust
agreement.
"Trustee" means The Trust Company of the Bank of Montreal and, subject to the
provisions of Article 10, includes any successor trustee.
"Voting Rights" means the voting rights attached to the Special Voting Share.
Section 1.2 Interpretation Not Affected by Headings, etc.
The division of this trust agreement into Articles, sections and other
portions and the insertion of headings are for convenience of reference only and
should not affect the construction or interpretation of this trust agreement.
Unless otherwise indicated, all references to an "Article", "section" or
"paragraph" followed by a number and/or a letter refer to the specified Article
or section of this trust agreement. The terms "this trust agreement", "hereof",
"herein" and "hereunder" and similar expressions refer to this trust agreement
and not to any particular Article, section or other portion hereof and include
any agreement or instrument supplementary or ancillary hereto.
Section 1.3 Number, Gender, etc.
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
Section 1.4 Date for any Action.
If any date on which any action is required to be taken under this trust
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
Section 2.1 Establishment of Trust.
The purpose of this trust agreement is to create the Trust for the benefit
of the Beneficiaries, as herein provided. The Trustee will hold the Special
Voting Share in order to enable the Trustee to execute the Voting Rights and
will hold the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise
<PAGE>
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such rights, in each case as trustee for and on behalf of the Beneficiaries as
provided in this trust agreement.
ARTICLE 3
SPECIAL VOTING SHARE
Section 3.1 Issue and Ownership of the Special Voting Share.
Newco hereby issues to, and deposits with, the Trustee, the Special Voting
Share to be hereafter held of record by the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Beneficiaries and in accordance with the
provisions of this trust agreement. Newco hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Beneficiaries of good and valuable
consideration (and the adequacy thereof) for the issuance of the Special Voting
Share by Newco to the Trustee. During the term of the Trust and subject to the
terms and conditions of this trust agreement, the Trustee shall possess and be
vested with full legal ownership of the Special Voting Share and shall be
entitled to exercise all of the rights and powers of an owner with respect to
the Special Voting Share provided that the Trustee shall:
(a) hold the Special Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Beneficiaries in accordance with
the provisions of this trust agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to sell, transfer, vote or otherwise deal in or
with the Special Voting Share and the Special Voting Share shall not
be used or disposed of by the Trustee for any purpose other than the
purposes for which this Trust is created pursuant to this trust
agreement.
Section 3.2 Legended Share Certificates.
CN will cause each certificate representing CN Stapled Units to bear an
appropriate legend notifying the Beneficiaries of their right to instruct the
Trustee with respect to the exercise of the Voting Rights in respect of the CN
Exchangeable Shares forming part of the CN Stapled Units of the Beneficiaries.
Section 3.3 Safe Keeping of Certificate.
The certificate representing the Special Voting Share shall at all times be
held in safe keeping by the Trustee.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
Section 4.1 Voting Rights.
The Trustee, as the holder of record of the Special Voting Share, shall be
entitled to all of the Voting Rights, including the right to vote in person or
by proxy
<PAGE>
-7-
the Special Voting Share on any matters, questions, proposals or propositions
whatsoever that may properly come before the shareholders of Newco at a Newco
Meeting or in connection with a Newco Consent. The Voting Rights shall be and
remain vested in and exerciseable by the Trustee. Subject to section 7.15:
(a) the Trustee shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Beneficiaries
entitled to instruct the Trustee as to the voting thereof at the time
at which the Newco Meeting is held; and
(b) to the extent that no instructions are received from a Beneficiary
with respect to the Voting Rights to which such Beneficiary is
entitled, the Trustee shall not exercise or permit the exercise of
such Voting Rights.
Section 4.2 Number of Votes.
With respect to all meetings of shareholders of Newco at which holders of
Newco Common Shares are entitled to vote (each, a "Newco Meeting") and with
respect to all written consents sought by Newco from its shareholders including
the holders of Newco Common Shares (each, a "Newco Consent"), each Beneficiary
shall be entitled to instruct the Trustee to cast and exercise one of the votes
comprised in the Voting Rights for each CN Stapled Unit owned of record by such
Beneficiary on the record date established by Newco or by applicable law for
such Newco Meeting or Newco Consent, as the case may be (the "Beneficiary
Votes"), in respect of each matter, question, proposal or proposition to be
voted on at such Newco Meeting or in connection with such Newco Consent.
Section 4.3 Mailings to Shareholders.
With respect to each Newco Meeting and Newco Consent, the Trustee will mail
or cause to be mailed (or otherwise communicate in the same manner as Newco
utilizes in communications to holders of Newco Stapled Units) to each of the
Beneficiaries named in the List referred to in section 4.6, such mailing or
communication to commence on the same day as the mailing or notice (or other
communication) with respect thereto is commenced by Newco to holders of Newco
Stapled Units:
(a) a copy of such notice, together with any related materials to be
provided to holders of Newco Stapled Units;
(b) a statement that such Beneficiary is entitled to instruct the Trustee
as to the exercise of the Beneficiary Votes with respect to such Newco
Meeting or Newco Consent or, pursuant to section 4.7, to attend such
Newco Meeting and to exercise personally the Beneficiary Votes
thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may
be given to the Trustee to give:
<PAGE>
-8-
(i) a proxy to such Beneficiary or his designee to exercise
personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Newco to exercise such Beneficiary Votes;
(d) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary is
entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the
case of a Newco Meeting shall not be earlier than the close of
business on the [second Business Day] prior to such meeting, and of
the method for revoking or amending such instructions.
For the purpose of determining Beneficiary Votes to which a Beneficiary is
entitled in respect of any Newco Meeting or Newco Consent, the number of CN
Exchangeable Shares represented by CN Stapled Units owned of record by the
Beneficiary shall be determined at the close of business on the record date
established by Newco or by applicable law for purposes of determining
shareholders entitled to vote at such Newco Meeting. Newco will notify the
Trustee of any decision of the Board of Directors of Newco with respect to the
calling of any Newco Meeting and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event in sufficient
time to enable the Trustee to perform its obligations contemplated by this
section 4.3.
Section 4.4 Copies of Shareholder Information.
Newco will deliver to the Trustee copies of all proxy materials (including
notices of Newco Meetings but excluding proxies to vote Newco Common Shares or
CN Voting Shares), information statements, reports (including without
limitation, all interim and annual financial statements) and other written
communications that, in each case, are to be distributed from time to time to
holders of Newco Stapled Units in sufficient quantities and in sufficient time
so as to enable the Trustee to send those materials to each Beneficiary at the
same time as such materials are first sent to holders of Newco Stapled Units.
The Trustee will mail or otherwise send to each Beneficiary, at the expense of
Newco, copies of all such materials (and all materials specifically directed to
the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by
Newco) received by the Trustee from Newco contemporaneously with the sending of
such materials to holders of Newco Stapled Units. The Trustee will also make
available for inspection by any Beneficiary at the Trustee's principal corporate
trust office in the City of Montreal all proxy materials, information
statements, reports and other written communications that are:
<PAGE>
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(a) received by the Trustee as the registered holder of the Special Voting
Share and made available by Newco generally to the holders of Newco
Stapled Units; or
(b) specifically directed to the Beneficiaries or to the Trustee for the
benefit of the Beneficiaries by Newco.
Section 4.5 Other Materials.
As soon as reasonably practicable after receipt by Newco or holders of
Newco Stapled Units (if such receipt is known by Newco) of any material sent or
given by or on behalf of a third party to holders of Newco Stapled Units
generally, including without limitation, dissident proxy and information
circulars (and related information and material) and tender and exchange offer
circulars (and related information and material), Newco shall use its reasonable
efforts to obtain and deliver to the Trustee copies thereof in sufficient
quantities so as to enable the Trustee to forward such material (unless the same
has been provided directly to Beneficiaries by such third party) to each
Beneficiary as soon as possible thereafter. Immediately upon receipt thereof,
the Trustee will mail or otherwise send to each Beneficiary, at the expense of
Newco, copies of all such materials received by the Trustee from Newco. The
Trustee will also make available for inspection by any Beneficiary at the
Trustee's principal corporate trust office in the City of Montreal copies of all
such materials.
Section 4.6 List of Persons Entitled to Vote.
CN shall, (a) prior to each annual, general and special Newco Meeting or
the seeking of any Newco Consent and (b) forthwith upon each request made at any
time by the Trustee in writing, prepare or cause to be prepared a list (the
"List") of the names and addresses of the Beneficiaries arranged in
alphabetical order and showing the number of CN Exchangeable Shares represented
by CN Stapled Units held of record by each such Beneficiary, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Newco Meeting or a Newco
Consent, at the close of business on the record date established by Newco or
pursuant to applicable law for determining the holders of Newco Stapled Units
entitled to receive notice of and/or to vote the Newco Common Share component
thereof at such Newco Meeting or to give consent in connection with such Newco
Consent. Each such List shall be delivered to the Trustee promptly after receipt
by CN of such request or the record date for such meeting or seeking of consent,
as the case may be. Newco agrees to give CN notice (with a copy to the Trustee)
of the calling of any Newco Meeting or the seeking of any Newco Consent,
together with the record dates therefor, sufficiently prior to the date of the
calling of such meeting or seeking of such consent so as to enable CN to perform
its obligations under this section 4.6.
Section 4.7 Entitlement to Direct Votes.
Any Beneficiary named in a List prepared in connection with any Newco
Meeting or Newco Consent will be entitled (a) to instruct the Trustee in the
manner described in section 4.3 with respect to the exercise of the Beneficiary
Votes to which
<PAGE>
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such Beneficiary is entitled or (b) to attend such meeting and personally
exercise thereat, as the proxy of the Trustee, the Beneficiary Votes to which
such Beneficiary is entitled.
Section 4.8 Voting by Trustee, and Attendance of Trustee Representative at
Meeting.
(a) In connection with each Newco Meeting and Newco Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with the
instructions received from a Beneficiary pursuant to section 4.3, the
Beneficiary Votes as to which such Beneficiary is entitled to direct
the vote (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Beneficiary prior to the time and
date fixed by the Trustee for receipt of such instruction in the
notice given by the Trustee to the Beneficiary pursuant to section
4.3.
(b) The Trustee shall cause a representative who is empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights
to attend each Newco Meeting. Upon submission by a Beneficiary (or its
designee) of identification satisfactory to the Trustee's
representative, and at the Beneficiary's request, such representative
shall sign and deliver to such Beneficiary (or its designee) a proxy
to exercise personally the Beneficiary Votes as to which such
Beneficiary is otherwise entitled hereunder to direct the vote, if
such Beneficiary either (i) has not previously given the Trustee
instructions pursuant to section 4.3 in respect of such meeting or
(ii) submits to such representative written revocation of any such
previous instructions. At such meeting, the Beneficiary exercising
such Beneficiary Votes shall have the same rights as the Trustee to
speak at the meeting in favour of any matter, question, proposal or
proposition, to vote by way of ballot at the meeting in respect of any
matter, question, proposal or proposition, and to vote at such meeting
by way of a show of hands in respect of any matter, question or
proposition.
Section 4.9 Distribution of Written Materials.
Any written materials distributed by the Trustee pursuant to this trust
agreement shall be sent by mail (or otherwise communicated in the same manner as
Newco utilizes in such communication to holders of Newco Stapled Units) to each
Beneficiary at its address as shown on the books of CN. CN shall provide or
cause to be provided to the Trustee for this purpose, on a timely basis and
without charge or other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable the Trustee
to carry out its duties under this trust agreement.
<PAGE>
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Section 4.10 Termination of Voting Rights.
All of the rights of a Beneficiary with respect to the Beneficiary Votes
exercisable in respect of the CN Exchangeable Shares represented by CN Stapled
Units held by such Beneficiary, including the right to instruct the Trustee as
to the voting of or to vote personally such Beneficiary Votes, shall be deemed
to be surrendered by the Beneficiary to Newco, and such Beneficiary Votes and
the Voting Rights represented thereby shall cease immediately upon the delivery
by such holder to the Trustee of the certificates for the CN Stapled Units
representing such CN Exchangeable Shares in connection with the exercise by the
Beneficiary of the Exchange Right or the occurrence of the automatic exchange of
CN Exchangeable Shares for Newco Common Shares, as specified in Article 5
(unless, in either case, NAR Subco or Newco, as applicable, shall not have
caused to be issued the requisite Newco Common Shares issuable in exchange
therefor and caused to be delivered Newco Stapled Units representing same
(together with the CN Voting Shares retained by such holder) to the Trustee for
delivery to the Beneficiaries), or upon the redemption of CN Exchangeable Shares
pursuant to Article 6 of the CN Exchangeable Share Provisions, or upon the
effective date of the liquidation, dissolution or winding-up of CN pursuant to
Article 5 of the CN Exchangeable Share Provisions, or upon the purchase of CN
Exchangeable Shares from the holder thereof by NAR Subco pursuant to the
exercise by NAR Subco of the Retraction Call Right or the Liquidation Call Right
unless, in each of these latter cases, upon presentation and surrender of the
required certificates, payment of the total retraction price or purchase price,
as the case may be, shall not be made in which case the rights of such
Beneficiary shall remain unaffected until the total amount of such price has
been paid.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
Section 5.1 Grant and Ownership of the Exchange Right.
Newco hereby grants to the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Beneficiaries the right (the "Exchange Right"),
upon the occurrence and during the continuance of an Insolvency Event, to
require Newco to purchase from each or any Beneficiary all or any part of the CN
Exchangeable Shares held by the Beneficiary and the Automatic Exchange Rights,
all in accordance with the provisions of this trust agreement. Newco hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy thereof) for
the grant of the Exchange Right and the Automatic Exchange Rights by Newco to
the Trustee. During the term of the Trust and subject to the terms and
conditions of this trust agreement, the Trustee shall possess and be vested with
full legal ownership of the Exchange Right and the Automatic Exchange Rights and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
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(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the
Beneficiaries in accordance with the provisions of this trust
agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to exercise or otherwise deal in or with the
Exchange Right or the Automatic Exchange Rights, and the Trustee shall
not exercise any such rights for any purpose other than the purposes
for which the Trust is created pursuant to this trust agreement.
Section 5.2 Legended Unit Certificates.
CN will cause each certificate representing CN Stapled Units to bear an
appropriate legend notifying the Beneficiaries of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the CN Exchangeable Shares forming
part of the CN Stapled Units held by a Beneficiary; and
(b) the Automatic Exchange Rights.
Section 5.3 General Exercise of Exchange Right.
The Exchange Right shall be and remain vested in and exercisable by the
Trustee. Subject to section 7.15, the Trustee shall exercise the Exchange Right
only on the basis of instructions received pursuant to this Article 5 from
Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To
the extent that no instructions are received from a Beneficiary with respect to
the Exchange Right, the Trustee shall not exercise or permit the exercise of the
Exchange Right.
Section 5.4 Purchase Price.
The purchase price payable by Newco for each CN Exchangeable Share to be
purchased by Newco under the Exchange Right shall be an amount per share equal
to (a) the Current Market Price of a Newco Stapled Unit on the last Business Day
prior to the day of closing of the purchase and sale of such CN Exchangeable
Share under the Exchange Right, which shall be satisfied in full by Newco
causing to be issued to such holder one Newco Common Share, plus (b) to the
extent not paid by CN, an additional amount equivalent to the full amount of all
declared and unpaid dividends on each such CN Exchangeable Share held by such
holder on any dividend record date which occurred prior to the closing of the
purchase and sale. The purchase price for each such CN Exchangeable Share so
purchased may be satisfied only by Newco issuing to the relevant Beneficiary,
one Newco Common Share and delivering or causing to be delivered to the relevant
Beneficiary a Newco Stapled Unit certificate representing same (as well as the
CN Voting Shares retained by such Beneficiary) and on the applicable payment
date a cheque for the balance, if any, of the purchase price without interest
(but less any amounts withheld pursuant to section 5.13).
<PAGE>
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Section 5.5 Exercise Instructions.
Subject to the terms and conditions herein set forth, a Beneficiary shall
be entitled, upon the occurrence and during the continuance of an Insolvency
Event, to instruct the Trustee to exercise the Exchange Right with respect to
all or any part of the CN Exchangeable Shares represented by CN Stapled Units
registered in the name of such Beneficiary on the books of CN. To cause the
exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver to
the Trustee, in person or by certified or registered mail, at its principal
corporate trust office in Montreal, Quebec or at such other places in Canada as
the Trustee may from time to time designate by written notice to the
Beneficiaries, the CN Stapled Unit certificates representing the CN Exchangeable
Shares which such Beneficiary desires Newco to purchase, duly endorsed in blank
for transfer, and accompanied by such other documents and instruments as may be
required to effect a transfer of CN Exchangeable Shares under the Canada
Business Corporations Act and the by-laws of CN and such additional documents
and instruments as the Trustee may reasonably require together with (a) a duly
completed form of notice of exercise of the Exchange Right, contained on the
reverse of or attached to the CN Stapled Unit certificates, stating (i) that the
Beneficiary thereby instructs the Trustee to exercise the Exchange Right so as
to require Newco to purchase from the Beneficiary the number of CN Exchangeable
Shares specified therein, (ii) that such Beneficiary has good title to and owns
all such CN Exchangeable Shares to be acquired by Newco free and clear of all
liens, claims and encumbrances, (iii) the names in which the certificates
representing Newco Stapled Units representing the Newco Common Shares issuable
in connection with the exercise of the Exchange Right are to be issued and (iv)
the names and addresses of the persons to whom such new certificates should be
delivered and (b) payment (or evidence satisfactory to the Trustee, CN and Newco
of payment) of the taxes (if any) payable as contemplated by section 5.8 of this
trust agreement. If only a part of the CN Exchangeable Shares represented by
any CN Stapled Unit certificate or certificates delivered to the Trustee are to
be purchased by Newco under the Exchange Right, a new certificate for the
balance of such CN Stapled Units shall be issued to the holder at the expense of
CN.
Section 5.6 Delivery of Newco Stapled Units; Effect of Exercise.
Promptly after receipt of the CN Stapled Unit certificates representing the
CN Exchangeable Shares which the Beneficiary desires Newco to purchase under the
Exchange Right, together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Right (and payment of
taxes, if any, payable as contemplated by section 5.8 or evidence thereof), duly
endorsed for transfer, the Trustee shall notify Newco and CN of its receipt of
the same, which notice to Newco and CN shall constitute exercise of the Exchange
Right by the Trustee on behalf of the holder of such CN Exchangeable Shares, and
Newco shall promptly thereafter issue to the relevant Beneficiary (or to such
other persons, if any, properly designated by such Beneficiary) the number of
Newco Common Shares issuable in connection with the exercise of the Exchange
Right, and shall deliver or cause to be delivered to the relevant Beneficiary a
Newco Stapled Unit certificate representing same (as well as the CN Voting
Shares retained by such Beneficiary) and on the applicable payment date cheques
for the balance, if any, of
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the total purchase price therefor without interest (but less any amounts
withheld pursuant to section 5.13); provided, however, that no such delivery
shall be made unless and until the Beneficiary requesting the same shall have
paid (or provided evidence satisfactory to the Trustee, CN and Newco of the
payment of) the taxes (if any) payable as contemplated by section 5.8 of this
trust agreement. Immediately upon the giving of notice by the Trustee to Newco
and CN of the exercise of the Exchange Right as provided in this section 5.6,
the closing of the transaction of purchase and sale contemplated by the Exchange
Right shall be deemed to have occurred and the holder of the CN Stapled Units
representing the CN Exchangeable Shares so sold shall be deemed to have
transferred to Newco all of such holder's right, title and interest in and to
such CN Exchangeable Shares and the related interest in the Trust Estate and
shall cease to be a holder of such CN Exchangeable Shares and shall not be
entitled to exercise any of the rights of a holder in respect thereof, other
than the right to receive his or her proportionate part of the total purchase
price therefor, unless the requisite number of Newco Common Shares is not
allotted and issued by Newco and Newco Stapled Units representing same (as well
as the CN Voting Shares retained by such Beneficiary) shall not have been
delivered for distribution by the Trustee to such Beneficiary within five
Business Days of the date of the giving of such notice by the Trustee, in which
case the rights of the Beneficiary shall remain unaffected until such Newco
Common Shares are so allotted and issued and the Newco Stapled Units
representing same have been delivered by Newco. Upon delivery by Newco to the
Trustee of certificates for Newco Stapled Units representing such Newco Common
Shares, the Trustee shall deliver such Newco Stapled Units to such Beneficiary
(or to such other persons, if any, properly designated by such Beneficiary).
Concurrently with such Beneficiary ceasing to be a holder of CN Exchangeable
Shares, the Beneficiary shall be considered and deemed for all purposes to be
the holder of the Newco Common Shares delivered to it pursuant to the Exchange
Right.
Section 5.7 Exercise of Exchange Right Subsequent to Retraction.
In the event that a Beneficiary has exercised its right under Article 6 of
the CN Exchangeable Share Provisions to require CN to redeem any or all of the
CN Exchangeable Shares held by the Beneficiary (the "Retracted Shares") and is
notified by CN pursuant to section 6.6 of the CN Exchangeable Share Provisions
that CN will not be permitted as a result of solvency requirements of applicable
law to redeem all such Retracted Shares, and provided that NAR Subco shall not
have exercised the Retraction Call Right with respect to the Retracted Shares
and that the Beneficiary has not revoked the retraction request delivered by the
Beneficiary to CN pursuant to section 6.1 of the CN Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Beneficiary to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares that CN is
unable to redeem. In any such event, CN hereby agrees with the Trustee and in
favour of the Beneficiary promptly to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Beneficiary to CN or to the
transfer agent of the CN Stapled Units (including without limitation, a copy of
the retraction request delivered pursuant to section 6.1 of the CN Exchangeable
Share Provisions) in connection with such proposed redemption of the Retracted
Shares and the Trustee will thereupon exercise the Exchange Right with respect
to the Retracted
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Shares that CN is not permitted to redeem and will require Newco to purchase
such shares in accordance with the provisions of this Article 5.
Section 5.8 Stamp or Other Transfer Taxes.
Upon any sale of CN Exchangeable Shares to Newco pursuant to the Exchange
Right or the Automatic Exchange Rights, the certificate or certificates for the
Newco Stapled Units representing the Newco Common Shares issued in payment
therefor to be delivered in connection with the payment of the total purchase
price therefor shall be issued in the name of the Beneficiary or in such names
as such Beneficiary may otherwise direct in writing without charge to such
Beneficiary; provided, however, that such Beneficiary (a) shall pay (and none of
Newco, CN or the Trustee shall be required to pay) any documentary, stamp,
transfer or other taxes that may be payable in respect of any transfer involved
in the issuance or delivery of such shares to a person other than such
Beneficiary or (b) shall have evidenced to the satisfaction of the Trustee,
Newco and CN that such taxes, if any, have been paid.
Section 5.9 Notice of Insolvency Event.
As soon as practicable following the occurrence of an Insolvency Event or
any event that with the giving of notice or the passage of time or both would be
an Insolvency Event, CN and Newco shall give written notice thereof to the
Trustee. As soon as practicable following the receipt of notice from CN and
Newco of the occurrence of an Insolvency Event, or upon the Trustee becoming
aware of an Insolvency Event, the Trustee will mail to each Beneficiary, at the
expense of Newco, a notice of such Insolvency Event, which notice shall contain
a brief statement of the rights of the Beneficiaries with respect to the
Exchange Right.
Section 5.10 Qualification of Newco Common Shares.
Newco covenants that if any Newco Common Shares to be issued pursuant to
the Exchange Right or the Automatic Exchange Rights require registration or
qualification with or approval of or the filing of any document, including any
prospectus or similar document, or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian or United States federal, provincial or state law
or regulation or pursuant to the rules and regulations of any regulatory
authority or the fulfilment of any other Canadian or United States federal,
provincial or state legal requirement before such shares may be issued or the
Newco Stapled Units of which they form part may be delivered by Newco to the
initial holder thereof or in order that such shares and the Newco Stapled Units
representing same may be freely traded thereafter (other than any restrictions
of general application on transfer, including without limitation by reason of a
holder being a "control person" for purposes of Canadian provincial securities
law or an "affiliate" of Newco for purposes of United States federal or state
securities law), Newco will in good faith expeditiously take all such actions
and do all such things as are necessary or desirable to cause such Newco Common
Shares and/or Newco Stapled Units, as applicable, to be and remain duly
registered, qualified or approved. Newco will in good faith expeditiously take
all such actions and do all such things as are reasonably
<PAGE>
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necessary or desirable to cause all Newco Common Shares represented by Newco
Stapled Units to be issued and delivered pursuant to the Exchange Right or the
Automatic Exchange Rights to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which such shares have been listed by
Newco and remain listed and are quoted or posted for trading at such time.
Section 5.11 Newco Common Shares.
Newco hereby represents, warrants and covenants that the Newco Common
Shares issuable as described herein and in the CN Exchangeable Share Provisions
will be duly authorized and validly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim or encumbrance.
Section 5.12 Automatic Exchange on Liquidation of Newco.
(a) Newco will give the Trustee notice of each of the following events at
the time set forth below:
(i) in the event of any determination by the board of directors
of Newco to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Newco or to effect
any other distribution of assets of Newco among its
shareholders for the purpose of winding up its affairs, at
least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution;
and
(ii) as soon as practicable following the earlier of (A) receipt
by Newco of notice of, and (B) Newco otherwise becoming
aware of, any threatened or instituted claim, suit, petition
or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of Newco or to effect
any other distribution of assets of Newco among its
shareholders for the purpose of winding up its affairs, in
each case where Newco has failed to contest in good faith
any such proceeding commenced in respect of Newco within 30
days of becoming aware thereof.
(b) As soon as practicable following receipt by the Trustee from Newco of
notice of any event (a "Liquidation Event") contemplated by
paragraph 5.12(a)(i) or paragraph 5.12(a)(ii) above, the Trustee will
give notice thereof to the Beneficiaries. Such notice shall include a
brief description of the automatic exchange of CN Exchangeable Shares
for Newco Common Shares provided for in paragraph 5.12(c).
(c) In order that the Beneficiaries will be able to participate on a pro
rata basis with the holders of Newco Common Shares in the distribution
of assets of Newco in connection with a Liquidation Event, on the
fifth Business Day prior to the effective date (the "Liquidation
Event Effective Date") of a Liquidation Event all of the then
outstanding CN Exchangeable Shares shall be automatically exchanged
for Newco
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Common Shares. To effect such automatic exchange, Newco shall purchase
on the fifth Business Day prior to the Liquidation Event Effective
Date each CN Exchangeable Share then outstanding and held by
Beneficiaries, and each Beneficiary shall sell the CN Exchangeable
Shares held by it at such time, for a purchase price per share equal
to (a) the Current Market Price of a Newco Stapled Unit on the fifth
Business Day prior to the Liquidation Event Effective Date, which
shall be satisfied in full by Newco issuing to the Beneficiary one
Newco Common Share, and (b) to the extent not paid by CN, an
additional amount equivalent to the full amount of all declared and
unpaid dividends on each such CN Exchangeable Share held by such
holder on any dividend record date which occurred prior to the date of
the exchange.
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated
by the automatic exchange of CN Exchangeable Shares for Newco Common
Shares shall be deemed to have occurred, and each Beneficiary shall be
deemed to have transferred to Newco all of the Beneficiary's right,
title and interest in and to such Beneficiary's CN Exchangeable Shares
and the related interest in the Trust Estate and shall cease to be a
holder of such CN Exchangeable Shares and Newco shall issue to the
Beneficiary the Newco Common Shares issuable upon the automatic
exchange of CN Exchangeable Shares for Newco Common Shares and on the
applicable payment date shall deliver to the Trustee for delivery to
the Beneficiary a cheque for the balance, if any, of the total
purchase price for such CN Exchangeable Shares without interest but
less any amounts withheld pursuant to section 5.13. Concurrently with
such Beneficiary ceasing to be a holder of CN Exchangeable Shares, the
Beneficiary shall be considered and deemed for all purposes to be the
holder of the Newco Common Shares issued pursuant to the automatic
exchange of CN Exchangeable Shares for Newco Common Shares and the
certificates held by the Beneficiary previously representing the CN
Stapled Units containing the CN Exchangeable Shares exchanged by the
Beneficiary with Newco pursuant to such automatic exchange shall
thereafter be deemed to represent Newco Stapled Units containing the
Newco Common Shares issued to the Beneficiary by Newco pursuant to
such automatic exchange. Upon the request of a Beneficiary and the
surrender by the Beneficiary of CN Stapled Unit certificates deemed to
represent Newco Stapled Units representing the Newco Common Shares so
acquired upon the exercise of such Automatic Exchange Right (as well
as the CN Voting Share retained by such Beneficiary), duly endorsed in
blank and accompanied by such instruments of transfer as Newco may
reasonably require, Newco shall deliver or cause to be delivered to
the Beneficiary certificates representing the Newco Stapled Units of
which the Beneficiary is the holder.
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Section 5.13 Withholding Rights.
Newco, CN and the Trustee shall be entitled to deduct and withhold from any
consideration otherwise payable under this trust agreement to any holder of CN
Exchangeable Shares or Newco Common Shares such amounts as Newco, CN or the
Trustee is required or permitted to deduct and withhold with respect to such
payment under the Income Tax Act (Canada), the United States Internal Revenue
Code of 1986 or any provision of provincial, state, local or foreign tax law, in
each case as amended or succeeded. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes as having been paid to
the holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required or
permitted to be deducted or withheld from any payment to a holder exceeds the
cash portion of the consideration otherwise payable to the holder, Newco, CN and
the Trustee are hereby authorized to sell or otherwise dispose of such portion
of the consideration as is necessary to provide sufficient funds to Newco, CN or
the Trustee, as the case may be, to enable it to comply with such deduction or
withholding requirement and Newco, CN or the Trustee shall notify the holder
thereof and remit to such holder any unapplied balance of the net proceeds of
such sale. CN and Newco represent and warrant that, based upon facts currently
known to each of them, CN has no current intention, as at the date of this
Agreement, to deduct or withhold, and Newco has no current intention, as at the
date of this Agreement to cause CN to deduct or withhold, from any dividend paid
to holders of CN Stapled Units representing CN Exchangeable Shares any amounts
under the United States Internal Revenue Code of 1986.
ARTICLE 6
RESTRICTIONS ON ISSUE OF NEWCO SPECIAL VOTING STOCK
Section 6.1 Issue of Additional Shares.
During the term of this trust agreement, Newco will not, without the
consent of the holders at the relevant time of CN Exchangeable Shares, given in
accordance with section 9.2 of the CN Exchangeable Share Provisions, issue any
shares of its special voting stock in addition to the Special Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.1 Powers and Duties of the Trustee.
The rights, powers, duties and authorities of the Trustee under this trust
agreement, in its capacity as trustee of the Trust, shall include:
(a) receipt and deposit of the Special Voting Share from Newco as trustee
for and on behalf of the Beneficiaries in accordance with the
provisions of this trust agreement;
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(b) granting proxies and distributing materials to Beneficiaries as
provided in this trust agreement;
(c) voting the Beneficiary Votes in accordance with the provisions of this
trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from Newco as trustee for and on behalf of the Beneficiaries in
accordance with the provisions of this trust agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this trust agreement, and in connection therewith
receiving from Beneficiaries CN Exchangeable Shares and other
requisite documents and distributing to such Beneficiaries Newco
Stapled Units and cheques, if any, to which such Beneficiaries are
entitled upon the exercise of the Exchange Right or pursuant to the
Automatic Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this trust agreement;
(h) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of Newco and
CN under this trust agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
In the exercise of such rights, powers, duties and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers,
duties and authority not in conflict with any of the provisions of this trust
agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers, duties
and authorities by the Trustee shall be final, conclusive and binding upon all
persons.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and with a view to the best
interests of the Beneficiaries and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
Section 7.2 No Conflict of Interest.
The Trustee represents to Newco and CN that at the date of execution and
delivery of this trust agreement there exists no material conflict of interest
in the role of the Trustee as a fiduciary hereunder and the role of the Trustee
in any other
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capacity. The Trustee shall, within 90 days after it becomes aware that such
material conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in Article 10.
If, notwithstanding the foregoing provisions of this section 7.2, the Trustee
has such a material conflict of interest, the validity and enforceability of
this trust agreement shall not be affected in any manner whatsoever by reason
only of the existence of such material conflict of interest. If the Trustee
contravenes the foregoing provisions of this section 7.2, any interested party
may apply to the [Quebec Superior Court - NTD: unless agreement governed by
Ontario law] for an order that the Trustee be replaced as Trustee hereunder.
Section 7.3 Dealings with Transfer Agents, Registrars, etc.
Newco and CN irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective registrars
and transfer agents, and with any such subsequent registrar or
transfer agent, of the CN Exchangeable Shares, the CN Voting Shares,
the CN Stapled Units, the Newco Common Shares and the Newco Stapled
Units; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this trust
agreement and (ii) from the transfer agent of the Newco Common Shares
and the Newco Stapled Units, and any subsequent transfer agent of such
shares, the unit certificates issuable upon the exercise from time to
time of the Exchange Right and pursuant to the Automatic Exchange
Rights.
Newco and CN irrevocably authorize their respective registrars and transfer
agents to comply with all such requests. Newco covenants that it will supply
its transfer agent with duly executed unit certificates for the purpose of
completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights.
Section 7.4 Books and Records.
The Trustee shall keep available for inspection by Newco and CN at the
Trustee's principal corporate trust office in Montreal, Quebec correct and
complete books and records of account relating to the Trust created by this
trust agreement, including without limitation, all relevant data relating to
mailings and instructions to and from Beneficiaries and all transactions
pursuant to the Exchange Right and the Automatic Exchange Rights. On or before
March 31, [NTD: insert year of/after Closing], and on or before March 31 in
every year thereafter, so long as the Special Voting Share is on deposit with
the Trustee, the Trustee shall transmit to Newco and CN a brief report, dated as
of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
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(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of CN Exchangeable Shares received by the Trustee on
behalf of Beneficiaries in consideration of the issuance by Newco of
Newco Common Shares in connection with the Exchange Right, during the
calendar year ended on such December 31; and
(c) any action taken by the Trustee in the performance of its duties under
this trust agreement which it had not previously reported and which,
in the Trustee's opinion, materially affects the Trust Estate.
Section 7.5 Income Tax Returns and Reports.
The Trustee shall, to the extent necessary, prepare and file on behalf of
the Trust appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system through
which the CN Stapled Units are traded.
Section 7.6 Indemnification Prior to Certain Actions by Trustee.
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this trust agreement at the request, order or
direction of any Beneficiary upon such Beneficiary furnishing to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred by the Trustee therein or thereby, provided that no
Beneficiary shall be obligated to furnish to the Trustee any such security or
indemnity in connection with the exercise by the Trustee of any of its rights,
duties, powers and authorities with respect to the Special Voting Share pursuant
to Article 4, subject to section 7.15, and with respect to the Exchange Right
pursuant to Article 5, subject to section 7.15, and with respect to the
Automatic Exchange Rights pursuant to Article 5.
None of the provisions contained in this trust agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties, or authorities unless
funded, given security and indemnified as aforesaid.
Section 7.7 Action of Beneficiaries.
No Beneficiary shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this trust agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Beneficiary has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
security or indemnity referred to in section 7.6 and the Trustee shall have
failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Beneficiary shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Beneficiaries shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or the Voting Rights, the
Exchange Right or the Automatic Exchange Rights except subject to the
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conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Beneficiaries.
Section 7.8 Reliance Upon Declarations.
The Trustee shall not be considered to be in contravention of any its
rights, powers, duties and authorities hereunder if, when required, it acts and
relies in good faith upon statutory declarations, certificates, opinions or
reports furnished pursuant to the provisions hereof or required by the Trustee
to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder if such statutory declarations, certificates, opinions or
reports comply with the provisions of section 7.9, if applicable, and with any
other applicable provisions of this trust agreement.
Section 7.9 Evidence and Authority to Trustee.
Newco and/or CN shall furnish to the Trustee evidence of compliance with
the conditions provided for in this trust agreement relating to any action or
step required or permitted to be taken by Newco and/or CN or the Trustee under
this trust agreement or as a result of any obligation imposed under this trust
agreement, including, without limitation, in respect of the Voting Rights or the
Exchange Right or the Automatic Exchange Rights and the taking of any other
action to be taken by the Trustee at the request of or on the application of
Newco and/or CN promptly if and when:
(a) such evidence is required by any other section of this trust agreement
to be furnished to the Trustee in accordance with the terms of this
section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this trust agreement, gives Newco and/or CN written
notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of Newco and/or CN
or a statutory declaration or a certificate made by persons entitled to sign an
Officer's Certificate stating that any such condition has been complied with in
accordance with the terms of this trust agreement.
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Right or the Automatic Exchange Rights or the taking of any other
action to be taken by the Trustee at the request or on the application of Newco
and/or CN, and except as otherwise specifically provided herein, such evidence
may consist of a report or opinion of any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert or any other person
whose qualifications give authority to a statement made by him, provided that if
such report or opinion is furnished by a director, officer or employee of Newco
and/or CN it shall be in the form of an Officer's Certificate or a statutory
declaration.
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Each statutory declaration, Officer's Certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this trust agreement shall include a statement by the person giving the
evidence:
(a) declaring that he has read and understands the provisions of this
trust agreement relating to the condition in question;
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement
or opinion; and
(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
Section 7.10 Experts, Advisers and Agents.
The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice of
or information obtained from any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Newco and/or CN or otherwise, and may
employ such assistants as may be necessary to the proper discharge of
its powers and duties and determination of its rights hereunder and
may pay proper and reasonable compensation for all such legal and
other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require
for the proper discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services performed for it (and
shall be entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the discharge of its duties hereunder and in the
management of the Trust.
Section 7.11 Investment of Moneys Held by Trustee.
Unless otherwise provided in this trust agreement, any moneys held by or on
behalf of the Trustee which under the terms of this trust agreement may or ought
to be invested or which may be on deposit with the Trustee or which may be in
the hands of the Trustee may be invested and reinvested in the name or under the
control of the Trustee in securities in which, under the laws of the [Province
of Quebec], trustees are authorized to invest trust moneys, provided that such
securities are stated to mature within two years after their purchase by the
Trustee, and the Trustee shall so invest such moneys on the written direction of
CN. Pending the investment of any moneys as hereinbefore provided, such moneys
may be deposited in the name of the Trustee in any chartered bank in Canada or,
with the consent of CN, in the deposit department of the Trustee or any other
loan or trust
<PAGE>
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company authorized to accept deposits under the laws of Canada or any province
thereof at the rate of interest then current on similar deposits.
Section 7.12 Trustee Not Required to Give Security.
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts, rights, duties, powers and authorities of this
trust agreement or otherwise in respect of the premises.
Section 7.13 Trustee Not Bound to Act on Request.
Except as in this trust agreement otherwise specifically provided, the
Trustee shall not be bound to act in accordance with any direction or request of
Newco and/or CN or of the directors thereof until a duly authenticated copy of
the instrument or resolution containing such direction or request shall have
been delivered to the Trustee, and the Trustee shall be empowered to act upon
any such copy purporting to be authenticated and believed by the Trustee to be
genuine.
Section 7.14 Authority to Carry on Business.
The Trustee represents to Newco and CN that at the date of execution and
delivery by it of this trust agreement it is authorized to carry on the business
of a trust company in each of the Provinces of Canada but if, notwithstanding
the provisions of this section 7.14, it ceases to be so authorized to carry on
business, the validity and enforceability of this trust agreement and the Voting
Rights, the Exchange Right and the Automatic Exchange Rights shall not be
affected in any manner whatsoever by reason only of such event but the Trustee
shall, within 90 days after ceasing to be authorized to carry on the business of
a trust company in any Province of Canada, either become so authorized or resign
in the manner and with the effect specified in Article 10.
Section 7.15 Conflicting Claims.
If conflicting claims or demands are made or asserted with respect to any
interest of any Beneficiary in any CN Stapled Units or CN Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Beneficiary in any
CN Stapled Units or CN Exchangeable Shares, resulting in conflicting claims or
demands being made in connection with such interest, then the Trustee shall be
entitled, at its sole discretion, to refuse to recognize or to comply with any
such claims or demands. In so refusing, the Trustee may elect not to exercise
any Voting Rights, Exchange Rights or Automatic Exchange Rights subject to such
conflicting claims or demands and, in so doing, the Trustee shall not be or
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee shall
be entitled to continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
<PAGE>
-25-
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or
demands have been conclusively settled by a valid written agreement
binding on all such adverse claimants, and the Trustee shall have been
furnished with an executed copy of such agreement certified to be in
full force and effect.
If the Trustee elects to recognize any claim or comply with any demand made
by any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate to fully indemnify it as between all conflicting claims
or demands.
Section 7.16 Acceptance of Trust.
The Trustee hereby accepts the Trust created and provided for by and in
this trust agreement and agrees to perform the same upon the terms and
conditions herein set forth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons who shall from time
to time be Beneficiaries, subject to all the terms and conditions herein set
forth.
ARTICLE 8
COMPENSATION
Section 8.1 Fees and Expenses of the Trustee.
Newco and CN jointly and severally agree to pay the Trustee reasonable
compensation for all of the services rendered by it under this trust agreement
and will reimburse the Trustee for all reasonable expenses (including taxes
other than taxes based on the net income of the Trustee) and disbursements,
including the cost and expense of any suit or litigation of any character and
any proceedings before any governmental agency reasonably incurred by the
Trustee in connection with its duties under this trust agreement; provided that
Newco and CN shall have no obligation to reimburse the Trustee for any expenses
or disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence, recklessness or willful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
Section 9.1 Indemnification of the Trustee.
Newco and CN jointly and severally agree to indemnify and hold harmless the
Trustee and each of its directors, officers and agents appointed and acting in
accordance with this trust agreement (collectively, the "Indemnified Parties")
against all claims, losses, damages, reasonable costs, penalties, fines and
reasonable expenses (including reasonable expenses of the Trustee's legal
counsel) which, without fraud, negligence, recklessness, willful misconduct or
bad faith on the part of
<PAGE>
-26-
such Indemnified Party, may be paid, incurred or suffered by the Indemnified
Party by reason or as a result of the Trustee's acceptance or administration of
the Trust, its compliance with its duties set forth in this trust agreement, or
any written or oral instruction delivered to the Trustee by Newco or CN pursuant
hereto.
In no case shall Newco or CN be liable under this indemnity for any claim
against any of the Indemnified Parties unless Newco and CN shall be notified by
the Trustee of the written assertion of a claim or of any action commenced
against the Indemnified Parties, promptly after any of the Indemnified Parties
shall have received any such written assertion of a claim or shall have been
served with a summons or other first legal process giving information as to the
nature and basis of the claim. Subject to (ii) below, Newco and CN shall be
entitled to participate at their own expense in the defence and, if Newco and CN
so elect at any time after receipt of such notice, either of them may assume the
defence of any suit brought to enforce any such claim. The Trustee shall have
the right to employ separate counsel in any such suit and participate in the
defence thereof but the fees and expenses of such counsel shall be at the
expense of the Trustee unless: (i) the employment of such counsel has been
authorized by Newco or CN; or (ii) the named parties to any such suit include
both the Trustee and Newco or CN and the Trustee shall have been advised by
counsel acceptable to Newco or CN that there may be one or more legal defences
available to the Trustee that are different from or in addition to those
available to Newco or CN and that, in the judgment of such counsel, would
present a conflict of interest were a joint representation to be undertaken (in
which case Newco and CN shall not have the right to assume the defence of such
suit on behalf of the Trustee but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee).
Section 9.2 Limitation of Liability.
The Trustee shall not be held liable for any loss which may occur by reason
of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this trust agreement, except to
the extent that such loss is attributable to the fraud, negligence,
recklessness, willful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
Section 10.1 Resignation.
The Trustee, or any trustee hereafter appointed, may at any time resign by
giving written notice of such resignation to Newco and CN specifying the date on
which it desires to resign, provided that such notice shall not be given less
than one month before such desired resignation date unless Newco and CN
otherwise agree and provided further that such resignation shall not take effect
until the date of the appointment of a successor trustee and the acceptance of
such appointment by the successor trustee. Upon receiving such notice of
resignation, Newco and CN shall promptly appoint a successor trustee by written
instrument in duplicate, one copy of
<PAGE>
-27-
which shall be delivered to the resigning trustee and one copy to the successor
trustee.
Section 10.2 Removal.
The Trustee, or any trustee hereafter appointed, may (provided a successor
trustee is appointed) be removed at any time on not less than 30 days' prior
notice by written instrument executed by Newco and CN, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to the successor
trustee.
Section 10.3 Successor Trustee.
Any successor trustee appointed as provided under this trust agreement
shall execute, acknowledge and deliver to Newco and CN and to its predecessor
trustee an instrument accepting such appointment. Thereupon the resignation or
removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor under this
trust agreement, with the like effect as if originally named as trustee in this
trust agreement. However, on the written request of Newco and CN or of the
successor trustee, the trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of this trust agreement, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the trustee so ceasing to act. Upon the request of any such successor
trustee, Newco, CN and such predecessor trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers.
Section 10.4 Notice of Successor Trustee.
Upon acceptance of appointment by a successor trustee as provided herein,
Newco and CN shall cause to be mailed notice of the succession of such trustee
hereunder to each Beneficiary specified in a List. If Newco or CN shall fail to
cause such notice to be mailed within 10 days after acceptance of appointment by
the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of Newco and CN.
ARTICLE 11
NEWCO SUCCESSORS
Section 11.1 Certain Requirements in Respect of Combination, etc.
Newco shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other person or, in the case of a
merger, of the continuing corporation resulting therefrom unless, but may do so
if, in addition to any other requirements required to be satisfied pursuant to
the terms of the Co-operation Agreement or the CN Exchangeable Share Provisions:
<PAGE>
-28-
(a) such other person or continuing corporation (herein called the "Newco
Successor"), by operation of law, becomes, without more, bound by the
terms and provisions of this trust agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of such
transaction, a trust agreement supplemental hereto and such other
instruments (if any) as are satisfactory to the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee are
reasonably necessary or advisable to evidence the assumption by the
Newco Successor of liability for all moneys payable and property
deliverable hereunder and the covenant of such Newco Successor to pay
and deliver or cause to be delivered the same and its agreement to
observe and perform all the covenants and obligations of Newco under
this trust agreement; and
(b) such transaction shall, to the satisfaction of the Trustee, acting
reasonably, and in the opinion of legal counsel to the Trustee, be
upon such terms and conditions as substantially to preserve and not to
impair in any material respect any of the rights, duties, powers and
authorities of the Trustee or of the Beneficiaries hereunder.
Section 11.2 Vesting of Powers in Successor.
Whenever the conditions of section 11.1 have been duly observed and
performed, the Trustee and, if required by section 11.1, Newco Successor and CN
shall execute and deliver the supplemental trust agreement provided for in
Article 12 and thereupon Newco Successor shall possess and from time to time may
exercise each and every right and power of Newco under this trust agreement in
the name of Newco or otherwise and any act or proceeding by any provision of
this trust agreement required to be done or performed by the Board of Directors
of Newco or any officers of Newco may be done and performed with like force and
effect by the directors or officers of such Newco Successor.
Section 11.3 Wholly-Owned Subsidiaries.
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned direct or indirect subsidiary of Newco with or into Newco or
the winding-up, liquidation or dissolution of any wholly-owned subsidiary of
Newco provided that all of the assets of such subsidiary are transferred to
Newco or another wholly-owned direct or indirect subsidiary of Newco and any
such transactions are expressly permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
Section 12.1 Amendments, Modifications, etc.
This trust agreement may not be amended or modified except by an agreement
in writing executed by Newco, CN and the Trustee and approved by the
<PAGE>
-29-
Beneficiaries in accordance with section 9.2 of the CN Exchangeable Share
Provisions.
Section 12.2 Ministerial Amendments.
Notwithstanding the provisions of section 12.1, the parties to this trust
agreement may in writing, at any time and from time to time, without the
approval of the Beneficiaries, amend or modify this trust agreement for the
purposes of:
(a) adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder provided that the Board of
Directors of each of CN and Newco shall be of the good faith opinion
that such additions will not be prejudicial to the rights or interests
of the Beneficiaries;
(b) making such amendments or modifications not inconsistent with this
trust agreement as may be necessary or desirable with respect to
matters or questions which, in the good faith opinion of the Board of
Directors of each of Newco and CN and in the opinion of the Trustee,
having in mind the best interests of the Beneficiaries it may be
expedient to make, provided that such Boards of Directors and the
Trustee shall be of the opinion that such amendments and modifications
will not be prejudicial to the interests of the Beneficiaries; or
(c) making such changes or corrections which, on the advice of counsel to
Newco, CN and the Trustee, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
Trustee and the Board of Directors of each of Newco and CN shall be of
the opinion that such changes or corrections will not be prejudicial
to the rights and interests of the Beneficiaries.
Section 12.3 Changes in Capital of Newco and CN.
At all times after the occurrence of any event contemplated pursuant to
section 4.1, 4.2, 4.3, 4.4 and 4.5 of the Co-operation Agreement or otherwise,
as a result of which either Newco Common Shares or the CN Exchangeable Shares or
both are in any way changed, this trust agreement shall forthwith be amended and
modified as necessary in order that it shall apply with full force and effect,
mutatis mutandis, to all new securities into which Newco Common Shares or the CN
Exchangeable Shares or both are so changed and the parties hereto shall execute
and deliver a supplemental trust agreement giving effect to and evidencing such
necessary amendments and modifications.
Section 12.4 Execution of Supplemental Trust Agreements.
No amendment to or modification or waiver of any of the provisions of this
trust agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time CN (when
<PAGE>
-30-
authorized by a resolution of its Board of Directors), Newco (when authorized by
a resolution of its Board of Directors) and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, trust agreements or
other instruments supplemental hereto, which thereafter shall form part hereof,
for any one or more of the following purposes:
(a) evidencing the succession of Newco Successors and the covenants of and
obligations assumed by each such Newco Successor in accordance with
the provisions of Article 11 and the successors of any successor
trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this trust agreement or the Voting Rights, the Exchange
Right or the Automatic Exchange Rights which, in the opinion of the
Trustee, will not be prejudicial to the interests of the Beneficiaries
or are, in the opinion of counsel to the Trustee, necessary or
advisable in order to incorporate, reflect or comply with any
legislation the provisions of which apply to Newco, CN, the Trustee or
this trust agreement; and
(c) for any other purposes not inconsistent with the provisions of this
trust agreement, including without limitation, to make or evidence any
amendment or modification to this trust agreement as contemplated
hereby, provided that, in the opinion of the Trustee, the rights of
the Trustee and Beneficiaries will not be prejudiced thereby.
Section 12.5 Meeting to Consider Amendments.
CN and Newco, acting jointly, shall be entitled to require the Trustee to
call a meeting or meetings of the Beneficiaries for the purpose of considering
any proposed amendment or modification requiring approval pursuant hereto. Any
such meeting or meetings shall be called and held in accordance with the by-laws
of CN, the CN Exchangeable Share Provisions and all applicable laws.
ARTICLE 13
TERMINATION
Section 13.1 Term.
The Trust created by this trust agreement shall continue until the earliest
to occur of the following events:
(a) no outstanding CN Exchangeable Shares are held by a Beneficiary;
(b) each of CN and Newco elects in writing to terminate the Trust and such
termination is approved by the Beneficiaries in accordance with
section 9.2 of the CN Exchangeable Share Provisions; and
<PAGE>
-31-
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King George VI of Canada and the United Kingdom of Great
Britain and CN Ireland living on the date of the creation of the
Trust.
[NTD: provide for re-execution/re-vesting every 20 years under Co-operation
Agreement to address issue raised under (c).]
Section 13.2 Survival of Agreement.
This trust agreement shall survive any termination of the Trust and shall
continue until there are no CN Exchangeable Shares outstanding held by a
Beneficiary; provided, however, that the provisions of Articles 8 and 9 shall
survive any such termination of this trust agreement.
ARTICLE 14
GENERAL
Section 14.1 Severability.
If any provision of this trust agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
trust agreement shall not in any way be affected or impaired thereby and the
agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this trust agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
Section 14.2 Enurement.
This trust agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Beneficiaries.
Section 14.3 Notices to Parties.
All notices and other communications between the parties hereunder shall be
in writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for such party as shall be specified in like notice):
(a) if to CN:
.
Attention: .
Telecopier No.: .
<PAGE>
-32-
(b) if to Newco [or NAR Subco]:
.
Attention: .
Telecopier No.: .
(c) if to the Trustee:
.
Attention: .
Telecopier No.: .
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
Section 14.4 Notice to Beneficiaries.
Any and all notices to be given and any documents to be sent to any
Beneficiaries may be given or sent to the address of such Beneficiary shown on
the register of holders of CN Stapled Units in any manner permitted by the by-
laws of CN from time to time in force in respect of notices to shareholders and
shall be deemed to be received (if given or sent in such manner) at the time
specified in such by-laws, the provisions of which by-laws shall apply mutatis
mutandis to notices or documents as aforesaid sent to such Beneficiaries.
Section 14.5 Counterparts.
This trust agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one and
the same instrument.
Section 14.6 Jurisdiction.
This trust agreement shall be construed and enforced in accordance with the
laws of the Province of Quebec [NTD: alternatively Ontario] and the laws of
Canada applicable therein.
Section 14.7 Attornment.
Each of the Trustee and Newco and CN agrees that any action or proceeding
arising out of or relating to this trust agreement may be instituted in the
courts of Quebec [NTD: alternatively Ontario], waives any objection which it may
have now or hereafter to the venue of any such action or proceeding, irrevocably
submits to the jurisdiction of the said courts in any such action or proceeding,
agrees to be
<PAGE>
-33-
bound by any final judgment of the said courts and not to seek, and hereby
waives, any review of the merits of any such judgment by the courts of any other
jurisdiction and hereby appoints CN at its registered office in the Province of
Quebec [NTD: alternatively Ontario] as attorney for service of process.
<PAGE>
-34-
IN WITNESS WHEREOF the parties hereto have caused this trust agreement to
be duly executed as of the date first above written.
CANADIAN NATIONAL RAILWAY COMPANY
By: _____________________________
Name: .
Title: .
NORTH AMERICAN RAILWAYS, INC.
By: _____________________________
Name: .
Title: .
[NAR HOLDINGS COMPANY]
By: _____________________________
Name: .
Title: .
THE TRUST COMPANY OF THE BANK OF
MONTREAL
By: _____________________________
Name: .
Title: .
By: C.S.
-----------------------------
Name: .
Title: .
<PAGE>
Exhibit G
---------
================================================================================
FORM OF
RIGHTS AGREEMENT
between
BURLINGTON NORTHERN SANTA FE CORPORATION
and
___________________________________
Rights Agent
Dated as of December 18, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions..........................................................1
Section 2. Appointment of Rights Agent..................................................8
Section 3. Issue of Right Certificates..................................................8
Section 4. Form of Right Certificates..................................................11
Section 5. Countersignature and Registration...........................................13
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates.....................14
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...............15
Section 8. Cancellation and Destruction of Right Certificates..........................20
Section 9. Availability of Preferred Shares............................................20
Section 10. Preferred Shares Record Date................................................21
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights..........22
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..................36
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power........36
Section 14. Fractional Rights and Fractional Shares.....................................40
Section 15. Rights of Action............................................................43
Section 16. Agreement of Right Holders..................................................44
Section 17. Right Certificate Holder Not Deemed a Stockholder...........................45
Section 18. Concerning the Rights Agent.................................................45
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......46
Section 20. Duties of Rights Agent..........................................47
Section 21. Change of Rights Agent..........................................52
Section 22. Issuance of New Right Certificates..............................54
Section 23. Redemption......................................................55
Section 24. Exchange........................................................56
Section 25. Notice of Certain Events........................................59
Section 26. Notices.........................................................60
Section 27. Supplements and Amendments......................................61
Section 28. Successors......................................................62
Section 29. Benefits of this Agreement......................................62
Section 30. Severability....................................................62
Section 31. Governing Law...................................................62
Section 32. Counterparts....................................................62
Section 33. Descriptive Headings............................................63
Section 34. Determinations and Actions by the Board of Directors............63
</TABLE>
-iii-
<PAGE>
Page
----
Signatures....................................................................62
Exhibit A - Form of Certificate of Designation, Preferences and Rights
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights Plan
-iv-
<PAGE>
RIGHTS AGREEMENT
----------------
Rights Agreement, dated as of December 18, 1999, between BURLINGTON
NORTHERN SANTA FE CORPORATION, a Delaware corporation (the "Company"), and
_________________, a ___________ trust company (the "Rights Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company outstanding as of the close of
business on December 31, 1999 (the "Record Date"), each Right representing the
right to purchase one one-hundredth of a Preferred Share (as hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share that shall become outstanding between the Record Date and the
Expiration Date (as such terms are hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
"Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined)
<PAGE>
of such Person, shall be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the Common Shares of the Company then outstanding,
but shall not include the Company, any Subsidiary (as such term is defined
herein) of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person holding Common Shares for or pursuant
to the terms of any such plan. Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of (a) an acquisition of Common
Shares by the Company which, by reducing the number of Common Shares
outstanding, increases the proportionate number of Common Shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding or (b) the acquisition by such Person of newly-issued Common Shares
directly from the Company (it being understood that a purchase from an
underwriter or other intermediary is not deemed for purposes hereof to be a
purchase directly from the Company); provided, however, that if a Person shall
-------- -------
become the Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding by reason of share purchases by the Company or the receipt of
newly-issued Common Shares directly from the Company and shall, after such share
purchases or direct issuance by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed to be
an "Acquiring Person;" provided further, however, that any transferee from such
---------------- -------
Person who becomes the Beneficial Owner of 15% or more of the Common Shares of
the Company then outstanding shall nevertheless be deemed to be an "Acquiring
Person". Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph, has
become such inadvertently, and such Person divests as promptly as practicable
(and in any event within ten Business Days after notification by the Company) a
sufficient number of Common Shares so that such Person would no longer be an
Acquiring Person, as defined pursuant to the
-2-
<PAGE>
foregoing provisions of this paragraph, then such Person shall not be deemed to
be an "Acquiring Person" for any purposes of this Agreement.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to have "beneficial ownership" of or to "beneficially own" any securities:
(a) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(b) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (i) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, whether written or
oral (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights,
rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner
-------- -------
of, have "beneficial ownership" of or to beneficially own, (A) securities
tendered pursuant to a tender or exchange offer made by
-3-
<PAGE>
or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event (as such term is hereinafter
defined) or (C) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event, which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) hereof ("Original Rights") or
pursuant to Section 11(i) or Section 22 hereof in connection with an
adjustment made with respect to Original Rights; (ii) the sole or shared
right to vote or dispose (including any such right pursuant to any
agreement, arrangement or understanding, whether written or oral);
provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) "beneficial ownership" (as
determined pursuant to Rule 13d-3 (or any successor rule) of the General
Rules and Regulations under the Exchange Act);
(c) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding, whether
-4-
<PAGE>
written or oral (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to clause (B) of
subparagraph (b) of this definition) or disposing of any securities of the
Company; or
(d) which are directly, indirectly or constructively owned by such
Person or any such Person's Affiliates or Associates, within the meaning of
Section 958 of the U.S. Internal Revenue Code of 1986, as amended.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, for purposes of this Agreement, neither (i) any "clearing agency,"
as defined in Section 3(a)(23)(A) of the Exchange Act, which is holding
securities solely in its capacity as a clearing agency, nor (ii) North American
Railways, Inc. ("Newco"), a Delaware corporation 50% owned by the Company and
50% owned by Canadian National Railway Company ("CN"), a Canadian corporation,
shall not be deemed a "Beneficial Owner" of, or to "beneficially own," any
shares of any class of capital stock of the Company as a result of the
execution, delivery or performance of the Combination Agreement dated as of
December 18, 1999 between CN, the Company, Newco
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<PAGE>
and Western Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of Newco ("Merger Sub"), as amended from time to time (the
"Combination Agreement") or the consummation of any of the transactions
contemplated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in New York are authorized or obligated by
law or executive order to close.
"close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., central time, on the next succeeding Business Day.
"Common Shares" when used with reference to the Company shall mean the
shares of common stock, par value $0.01 per share, of the Company (as such
shares may be constituted or designated, or as such par value may be changed,
from time to time during the term of this Agreement). "Common Shares" when used
with reference to any Person other than the Company shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or the
equity securities or other equity interest having power to control or direct the
management of such other Person.
"Distribution Date" shall have the meaning set forth in Section 3
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expiration Date" shall have the meaning set forth in Section 7
hereof.
"Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
"Merger Date" shall have the meaning set forth in Section 7 hereof.
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<PAGE>
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Shares" shall mean shares of Junior Participating Preferred
Stock, Series B, par value $0.01 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designations, Preferences
and Rights attached to this Agreement as Exhibit A.
"Purchase Price" shall have the meaning set forth in Section 4 hereof.
"Redemption Date" shall have the meaning set forth in Section 7
hereof.
"Right Certificate" shall have the meaning set forth in Section 3
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) promulgated under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
"Subsidiary" shall mean, with reference to any Person, any corporation
or other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"Triggering Event" shall mean any event described in Section 11(a)(ii)
or Section 13(a) hereof.
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<PAGE>
Any determination or interpretation required in connection with any of the
definitions contained in this Section 1 shall be made by the Board of Directors
of the Company in their good faith judgment, which determination shall be final
and binding on the Rights Agent.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights Agent.
Section 3. Issue of Right Certificates.
---------------------------
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<PAGE>
(a) Until the earlier of (i) the close of business on the tenth day after
the Shares Acquisition Date or (ii) the close of business on the tenth Business
Day (or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming the Beneficial Owner of Common Shares aggregating 15% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be certificates for Rights)
and not by separate certificates, and (y) the Rights will be transferable only
in connection with the transfer of the underlying Common Shares (including a
transfer to the Company). The Company shall give the Rights Agent prompt
written notice of the Distribution Date. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will,
after receipt of written notice of the Distribution Date from the Company,
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send at the expense of
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<PAGE>
the Company) to each record holder of Common Shares as of the close of business
on the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate, in substantially the form of Exhibit B hereto
(a "Right Certificate"), evidencing an aggregate number of Rights equal to one
Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) As soon as practicable after the Record Date, the Company will send a
copy of a Summary of Rights Plan, in substantially the form of Exhibit C hereto
(the "Summary of Rights Plan"), to each record holder of Common Shares as of the
close of business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights Plan, and registered holders
of Common Shares shall also be the registered holders of the associated Rights.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the transfer of any certificate for Common Shares outstanding
on the Record Date, with or without a copy of the Summary of Rights Plan, shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Rights shall be issued in respect of all Common Shares which are issued
(whether originally issued or delivered from the Company's treasury) after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date. Certificates representing such Common Shares
shall also be deemed to be certificates for Rights. Certificates representing
both Common Shares and Rights in accordance with this Section 3 which are
executed and delivered (whether the Common Shares represented thereby are
originally issued, delivered from the Company's treasury or are presented for
transfer) by the
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Company (including, without limitation, certificates representing reacquired
Common Shares referred to in the last sentence of this paragraph (c)) after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date shall have impressed on, printed on, written
on or otherwise affixed to them a legend substantially equivalent to the
following:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in the Rights Agreement between BURLINGTON NORTHERN
SANTA FE CORPORATION (the "Company") and ___________________, dated as of
December 18, 1999 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder,
shall become null and void.
Until the Distribution Date, the Rights associated with the Common Shares shall
be evidenced by the certificates representing the associated Common Shares
alone, and the transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
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<PAGE>
Section 4. Form of Right Certificates.
--------------------------
(a) The Right Certificates (and the forms of election to purchase Preferred
Shares and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. The Right Certificates shall be in a
machine printable format and in a form reasonably satisfactory to the Rights
Agent. Subject to the provisions of Sections 11, 13, 22 and 24 hereof, the
Right Certificates shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the
price per one one-hundredth of a Preferred Share set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes an Acquiring Person, or (iii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding, whether written or oral, regarding the transferred
Rights or (B) a transfer which the Board of Directors otherwise concludes in
good faith is part of a plan, arrangement or understanding, whether written or
oral, which has as a
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<PAGE>
primary purpose or effect avoidance of Section 7(e) hereof, and any Right
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Right Certificate referred to
in this sentence, shall contain (to the extent feasible and otherwise reasonably
identifiable as such) the following legend:
The Rights represented by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the Rights represented
hereby may become void in the circumstances specified in Section 7(e) of
such Agreement.
The Company shall instruct the Rights Agent in writing of the Rights which
should be so legended and shall supply the Rights Agent with such legended Right
Certificates. The provisions of Section 7(e) shall apply whether or not any
Right Certificate actually contains the foregoing legend.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, any Vice Chairman, its President, any of its Vice
Presidents, or its Treasurer, either manually or by facsimile signature, shall
have affixed thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who
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<PAGE>
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its office designated for such purpose, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Sections 4(b), 7(e), 14 and 24 hereof, at
any time after the close of business on the Distribution Date, and at or prior
to the close of business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of
Preferred Shares (or, following a Triggering Event, Common Shares, other
securities or property, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent,
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<PAGE>
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Right Certificate accompanied by such documents as the Rights Agent
may deem appropriate and the Company shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 4 and
7 hereof, countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment by the holders of Rights Certificates of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor
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<PAGE>
to the Rights Agent for countersignature and delivery to the registered holder
in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the office of
the Rights Agent designated for such purpose, together with payment of the
Purchase Price with respect to each surrendered Right for the total number of
Preferred Shares (or other securities or property, as the case may be) as to
which the Rights are exercised, at or prior to the earliest of (i) the close of
business on December 18, 2009 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the "Redemption
Date"), (iii) the time immediately prior to the effective time of the merger of
Merger Sub with and into the Company in accordance with Delaware law and
pursuant to the Combination Agreement (the "Merger Date") (the earliest of (i),
(ii) or (iii) being herein referred to as the "Expiration Date") or (iv) the
time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $100.00, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
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<PAGE>
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate on the reverse side of
the Right Certificate duly executed, accompanied by such documents as the Rights
Agent may deem appropriate, payment of the Purchase Price for the shares (or
other securities or property, as the case may be) to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 9 hereof by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is the transfer
agent of the Preferred Shares) certificates for the number of Preferred Shares
to be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall have elected to
deposit the Preferred Shares issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered
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<PAGE>
holder of such Right Certificate. In the event that the Company is obligated to
issue other securities (including Common Shares) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the occurrence of a Triggering Event, any Rights beneficially owned by (i)
an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes an Acquiring Person, or
(iii) a transferee of an Acquiring Person (or such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
an Acquiring Person and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding,
whether written or oral, regarding the transferred Rights or (B) a transfer
which the Board of Directors otherwise concludes in good faith is part of a
plan, arrangement or
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<PAGE>
understanding (whether written or oral) which has as a primary purpose or effect
the avoidance of this Section 7(e), shall become null and void without any
further action, and any holder of such Rights shall thereupon have no rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise, from and after the occurrence of a Triggering Event. The
Company shall use all reasonable efforts to insure that the provisions of this
Section 7(e) hereof are complied with, but shall have no liability to any holder
of Rights for the inability to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise shall have been completed and signed by the
registered holder thereof and the Company shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
(g) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) or any Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) held in its treasury,
the number of Preferred Shares (and, following the occurrence of a Triggering
Event,
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<PAGE>
Common Shares and/or other securities) that will be sufficient to permit the
exercise in full of all outstanding Rights.
(h) Notwithstanding any statement to the contrary contained in this
Agreement or in any Right Certificate, if the Distribution Date or the Shares
Acquisition Date shall occur prior to the Record Date, the provisions of this
Agreement, including (without limitation) Sections 3 and 11(a)(ii), shall be
applicable to the Rights upon their issuance to the same extent such provisions
would have been applicable if the Record Date were the date of this Agreement.
Section 8. Cancellation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, cause such cancelled Right Certificates to be
destroyed, and in such case cause a certificate of destruction to be delivered
to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and
--------------------------------
agrees that it will take all such action as may be necessary to ensure that all
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities) delivered upon
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<PAGE>
exercise of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares and/or other securities), subject to payment of the Purchase Price, be
duly and validly authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Shares (or Common Shares
and/or other securities, as the case may be) in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts for
Preferred Shares (or Common Shares and/or other securities, as the case may be)
upon the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each person (other than the
----------------------------
Company) in whose name any certificate for Preferred Shares (or Common Shares
and/or other securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the shares or securities represented thereby on, and such
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<PAGE>
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes or other governmental charges) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares or securities on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Shares
(or Common Shares and/or other securities, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares (or Common Shares and/or other securities, as the case may be)
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
-----------------------------------------------------------
Rights. The Purchase Price, the number and kind of shares covered by each Right
- ------
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares into a
greater number of Preferred Shares, (C) combine the outstanding Preferred
Shares into a smaller number of Preferred Shares or (D) issue any shares of
its capital stock in a reclassification of the Preferred Shares,
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except as otherwise provided in this Section 11(a) and Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of
one Right be less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right. If an event
occurs which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person, each holder of a Right, except as provided
below and in Section 7(e) hereof, shall thereafter have a right to receive,
upon exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of
the
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Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by
(y) 50% of the then current per share market price of the Company's Common
Shares (determined pursuant to Section 11(d) hereof) on the date of the
occurrence of such event. In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any action which would eliminate or diminish the benefits
intended to be afforded by the Rights.
(iii) In lieu of issuing Common Shares of the Company in accordance
with Section 11(a)(ii) hereof, the Company may, in the sole discretion of
the Board of Directors, elect to (and, in the event that the Board of
Directors has not exercised the exchange right contained in Section 24
hereof and there are not sufficient issued but not outstanding and
authorized but unissued Common Shares to permit the exercise in full of the
Rights in accordance with Section 11(a)(ii), the Company shall) take all
such action as may be necessary to authorize, issue or pay, upon the
exercise of the Rights, cash (including by way of a reduction of the
Purchase Price), property, other securities or any combination thereof
having an aggregate value equal to the value of the Common Shares of the
Company which otherwise would have been issuable pursuant to Section
11(a)(ii), which aggregate value shall be determined by a majority of the
Board of Directors. For purposes of the preceding sentence, the value of
the Common Shares shall be determined pursuant to Section 11(d) hereof and
the value of any equity securities which a majority
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<PAGE>
of the Board of Directors determines to be a "common stock equivalent"
(including the Preferred Shares, in such ratio as the Board of Directors
shall determine) shall be deemed to have the same value as the Common
Shares. Any such election by the Board of Directors must be made and
publicly announced within 60 days following the date on which the event
described in Section 11(a)(ii) shall have occurred. Following the
occurrence of the event described in Section 11(a)(ii), a majority of the
Board of Directors then in office may suspend the exercisability of the
Rights for a period of up to 60 days following the date on which the event
described in Section 11(a)(ii) shall have occurred to the extent that such
directors have not determined whether to exercise the Company's right of
election under this Section 11(a)(iii). In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("equivalent preferred shares")) or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share (or having a conversion
price per share, if a security convertible into Preferred Shares or equivalent
preferred shares) less than the then current per share market price of the
Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by
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<PAGE>
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent. Preferred
Shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a
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consolidation or merger in which the Company is the continuing or surviving
corporation) of evidences of indebtedness or assets (other than a regular
quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the then current per
share market price of the Preferred Shares on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
under Section 11(a)(iii) hereof, the "current per share market price" of
any security (a "Security" for the purpose of this Section 11(d)(i)) on any
date shall be deemed to be the average of the
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daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to
such date, and for the purpose of any computation under Section 11(a)(iii)
hereof, the "current per share market price" of a Security on any date
shall be deemed to be the average of the daily closing prices per share of
such Security for thirty (30) consecutive Trading Days immediately prior to
such date; provided, however, that in the event that the current per share
market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Security and prior to
the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the "current
per share market price" shall be appropriately adjusted to reflect the
current market price per share equivalent (ex-dividend) of such Security.
The closing price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to
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<PAGE>
trading or, if the Security is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in use, or,
if on any such date the Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is
making a market in the Security, the fair value of such Security on such
date (as determined in good faith by the Board of Directors of the Company)
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares of the Company as determined pursuant to
Section 11(d)(i) (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares of the Company nor
the Preferred Shares are publicly held or so
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<PAGE>
listed or traded, "current per share market price" shall mean the fair
value per share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed
with the Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one ten-
thousandth of any other share or security, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in this Section 11, and the provisions
of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply
on like terms to any such other shares.
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<PAGE>
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by
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<PAGE>
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the
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<PAGE>
number of one one-hundredths of a Preferred Share which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of
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Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, dividends on Preferred Shares payable in
Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(n) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 23, 24 and 27 hereof, take (nor will
it permit any of its Subsidiaries to take) any action if at the time such action
is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(o) The Company covenants and agrees that, except for the transactions
contemplated by the Combination Agreement, it shall not, at any time after the
Distribution Date, (i) combine or consolidate with any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(n)),
(ii) merge with or into any other Person (other than a Subsidiary of the company
in a transaction which complies with Section 11(n)), or (iii) sell or transfer
(or permit any of its Subsidiaries to sell or transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company an/or any of its Subsidiaries in
one or more transactions each of which complies with Section 11(n)) if (x) at
the time of or immediately after such combination, consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the
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<PAGE>
Rights or (y) prior to, simultaneously with or immediately after such
combination, combination, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(p) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (i) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (ii) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
(q) So long as the shares issuable upon the exercise of the Rights may be
listed on any national securities exchange or quotation service, the Company
shall use its best efforts to
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cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or quotation service
upon official notice of issuance upon such exercise.
(r) The Company shall use its best efforts to (i) file, as soon as
practicable following the first occurrence of a Triggering Event, a registration
statement under the Securities Act with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Securities Act) until the date of
the Expiration Date. The Company will also take such action as may be
appropriate under the blue sky laws of the various states. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file such registration
statement or in order to comply with such blue sky laws. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended. A further public
announcement shall state the termination of such suspension.
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Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and may assume that no adjustment has been made
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) If after the Shares Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person, (y)
any Person shall consolidate with the Company, or merge with and into the
Company and the Company shall be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part of the Common Shares
shall be changed into or exchanged for stock or other securities of any other
Person (or the Company) or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons other than the Company
or one or more of its wholly-owned Subsidiaries, then, and in each such case,
proper provision shall be made so that (i) each holder of a Right (except as
otherwise provided
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<PAGE>
herein) shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable Common Shares of the Principal Party (as hereinafter defined),
free and clear of all liens, rights of call or first refusal, encumbrances or
other adverse claims, as shall equal the result obtained by (A) multiplying the
then current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (or, if such Right is not then
exercisable for a number of one one-hundredths of a Preferred Share, the number
of such fractional shares for which it was exercisable immediately prior to an
event described under Section 11(a)(ii) hereof) and dividing that product by (B)
50% of the then current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, or otherwise, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal Party and (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights.
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(b) "Principal Party" shall mean:
(i) In the case of any transaction described in (x) or (y) of the
first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in such
merger or consolidation, and if no securities are so issued, the Person
that is the continuing or surviving entity of such merger or consolidation
(including the Company if applicable); and
(ii) in the case of any transaction described in (z) of the first
sentence in Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case described in clauses (b)(i) and
- -------- -------
(b)(ii): (1) if the Common Shares of such Person are not at such time and have
not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value; and (3) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the
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Principal Parties in each such chain shall bear the obligations set forth in
this Section 13 in the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have sufficient Common Shares
authorized to permit the full exercise of the Rights and prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities
Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date;
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act; and
(iii) take such actions as may be necessary or appropriate under the
blue sky laws of the various states.
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<PAGE>
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that one of the
transactions described in this Section 13(a) shall occur at any time after the
occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights
which have not theretofore been exercised shall thereafter become exercisable in
the manner described in Section 13(a).
(d) In no event shall the Rights Agent have any liability in respect of any
such Principal Party transactions, including without limitation, the propriety
thereof. The Rights Agent may rely and be fully protected in relying upon a
certificate of the Company stating that the provisions of this Section 13 have
been fulfilled. Notwithstanding anything in this Agreement to the contrary, the
prior written consent of the Rights Agent must be obtained in connection with
any supplemental agreement which alters the rights or duties of the Rights
Agent.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
---------------------------------------
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there may be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked
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prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
--------
such depositary receipts shall have all the rights,
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privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one one-
hundredth of a Preferred Share. For the purposes of this Section 14(b), the
current market value of one one-hundredth of a Preferred Share shall be one one-
hundredth of the closing price of a Preferred Share (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of Common Shares upon exercise of the Rights or
to distribute certificates which evidence fractional Common Shares. In lieu of
fractional Common Shares, the Company may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Common
Share. For purposes of this Section 14(c), the current market value of one
Common Share shall be the closing price of one Common Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
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Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office of
the Rights Agent designated for
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such purposes, duly endorsed or accompanied by a proper instrument of transfer
and with appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights Agent may deem
and treat the person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or any other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as
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such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
---------------------------
the Rights Agent such compensation as shall be agreed to in writing between the
Company and the Rights Agent for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without negligence, bad faith
or willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending against any
claim of liability arising, directly or indirectly, therefrom.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, opinion, notice, instruction, direction,
consent, certificate,
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statement, or other paper or document believed by it to be genuine and to be
signed, executed by the proper person or persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof.
The provisions of this Section 18 shall survive the expiration of the
Rights and the termination of this Agreement.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any Person into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any Person resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any Person succeeding to all or substantially all the stock
transfer or corporate trust business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, that such corporation would be eligible for
--------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered; any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all
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such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Company and
the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel satisfactory to it (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability or responsibility to the Company or to any
holder of any Right Certificate in respect of any action taken or omitted by it
in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the
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<PAGE>
Company prior to taking or suffering or omitting action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, any Vice Chairman, the President, any Vice President, the Treasurer or
the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company only for, and
shall indemnify and hold harmless the Company from and against, any and all
losses, liabilities, costs, damages and expenses (including attorney's fees)
arising out of or in connection with, the Rights Agents' gross negligence, bad
faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersigna ture thereof) or be required to verify
the same, but all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming
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<PAGE>
void pursuant to Section 7(e) hereof) or any adjustment in the terms of the
Rights (including the manner, method or amount thereof) provided for in Section
3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after receipt of a certificate furnished
pursuant to Section 12 describing a change or adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable, nor shall the Rights Agent be responsible
for the legality of the terms hereof in its capacity as an administrative agent.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, any Vice
Chairman, the President, any Vice President, the Secretary or the Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the
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<PAGE>
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Agreement and the
date on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date such application is given,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or its Subsidiaries or become pecuniarily interested in any
transaction in which the Company or its Subsidiaries may be interested, or
contract with or lend money to the Company or its Subsidiaries or otherwise act
as fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or its Subsidiaries or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any
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<PAGE>
such act, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise, transfer, split-up, combination or exchange, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise, transfer, split-up, combination or
exchange without first consulting with the Company.
(k) The Rights Agent shall not be under any duty or responsibility to
insure compliance with any applicable federal or state securities laws in
connection with the issuance, transfer or exchange of Right Certificates.
(l) The Rights Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Company or one or more holders of Right Certificates shall furnish
the Rights Agent with security and indemnity to its satisfaction for any costs
and expenses which may be incurred.
(m) The Rights Agent shall not be liable for failure to perform any duties
except as specifically set forth herein and no implied covenants or obligations
shall be read into this Agreement against the Rights Agent whose duties and
obligations are ministerial and shall be determined solely by the express
provisions hereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in
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<PAGE>
writing mailed to the Company and to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation, bank or other entity organized and doing
business under the laws of the United States or of any other state of the United
States, which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100 million or is an Affiliate of an
entity having a combined capital and surplus of at least $100 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent
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<PAGE>
without further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of options
or under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such
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<PAGE>
issuance or sale; provided, however, that (i) no such Right Certificate shall be
issued, if, and to the extent that, the Company shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued, and (ii) no such Right Certificate shall be issued, if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, at any time
prior to such time as any Person becomes an Acquiring Person, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the
Rights by the Board of Directors may be made effective at such time on such
basis and with such conditions as the Board of Directors in its sole discretion
may establish. If redemption of the Rights is to be effective as of a future
date, the Rights shall continue to be exercisable, subject to Section 7 hereof,
until the effective date of the redemption, provided that nothing contained
herein shall preclude the Board of Directors from subsequently causing the
Rights to be redeemed at a date earlier than the previously scheduled effective
date of the redemption. The Company may, at its option, pay the Redemption
Price in cash, Common Shares (based on the current per share market price of the
Common Shares at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
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<PAGE>
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights (or at the effective time of such
redemption established by the Board of Directors of the Company pursuant to
paragraph (a) of this Section 23), and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice, with simultaneous written notice
to the Rights Agent, of any such redemption; provided, however, that the
-------- -------
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights or, if later, the effectiveness of the
redemption of the Rights pursuant to the last sentence of paragraph (a), the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. The Company may, at its
option, discharge all of its obligations with respect to the Rights by (i)
issuing a press release announcing the manner of redemption of the Rights, (ii)
depositing with a bank or trust company having a capital and surplus of at least
$100,000,000, funds necessary for such redemption, in trust, to be applied to
the redemption of the Rights so called for redemption and (iii) arranging for
the mailing of the Redemption Price to the registered holders of the Rights;
then, and upon such action, all outstanding Rights
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Certificates shall be null and void without further action by the Company.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23, in Section 24 hereof, or in
connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
--------
its option, at any time after a Triggering Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
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shall promptly give public notice, with simultaneous written notice to the
Rights Agent, of any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b) hereof) for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of
each Common Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may
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be necessary to authorize additional Common Shares or Preferred Shares for
issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
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(a) In case the Company shall propose at any time after the Distribution
Date (i) to pay any dividend payable in stock of any class to the holders of its
Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, and to the Rights Agent, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for
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determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, and to the Rights Agent, in accordance with
Section 26 hereof, a notice of the occurrence of such event, which notice shall
describe such event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
BURLINGTON NORTHERN SANTA FE CORPORATION
2650 Lou Menk Drive
Ft. Worth, TX 76131
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
_______________________
_______________________
_______________________
Attention: __________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by
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<PAGE>
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company. Notices or demands
sent by mail shall be deemed given or made three Business Days after the date
they are sent.
Section 27. Supplements and Amendments. The Company may from time to
--------------------------
time, and the Rights Agent shall, if so directed by the Company supplement or
amend any provision of this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any amendment, supplement, addition or deletion
hereto or make any other provisions with respect to the Rights which the Company
may deem necessary or desirable, any such supplement or amendment to be
evidenced by a writing signed by the Company and the Rights Agent; provided,
--------
however, that from and after such time as any Person becomes an Acquiring
- -------
Person, this Agreement shall not be amended in any manner which would adversely
affect the interests of the holders of Rights.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for
-62-
<PAGE>
the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 30. 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 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.
Section 31. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-63-
<PAGE>
Section 34. Determinations and Actions by the Board of Directors. The
----------------------------------------------------
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or the Company or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, interpretations and determinations
(including, for purpose of clause (ii) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (i) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Right Certificates and all other parties, and (ii) not subject the Board of
Directors to any liability to the holders of the Right Certificates.
-64-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: BURLINGTON NORTHERN SANTA FE
CORPORATION
By:_______________________________ By:_______________________________
Title: Corporate Secretary Title: Chairman and Chief
Executive Officer
Attest: _________________________________
By:_______________________________ By:______________________________
Title: Title:
-65-
<PAGE>
Exhibit A
---------
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF JUNIOR PARTICIPATING PREFERRED STOCK, SERIES B, $0.01 PAR VALUE
of
BURLINGTON NORTHERN SANTA FE CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Burlington Northern Santa Fe Corporation, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, hereby
certifies that the following resolution was adopted by the Board of Directors of
the Corporation:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, as amended, of the Corporation,
the Board of Directors on December 17, 1999 adopted the following resolution
creating a series of 3,000,000 shares of preferred stock designated as "Junior
Participating Preferred Stock, Series B," $0.01 par value:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of its Certificate of
Incorporation, as amended, a series of preferred stock, par value $0.01 per
share, of the Corporation (such preferred stock being herein referred to as
"Preferred Stock," which term shall include any additional shares of preferred
stock of the same class heretofore or hereafter authorized to be issued by the
Corporation), consisting of 3,000,000 shares is hereby created, and the voting
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, are as
follows:
Section 1. Designation and Amount. There shall be a series of Preferred
----------------------
Stock of the Corporation which shall be designated as "Junior Participating
Preferred Stock, Series B," par value $0.01 per share (hereinafter called
"Series B Preferred Stock"), and the number of shares constituting such series
shall be 3,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors and by the filing of a certificate pursuant
to the provisions of the General Corporation Law of the State of Delaware
stating that such increase or reduction has been so authorized; provided,
--------
however, that no decrease shall reduce the number of shares of Series B
- -------
Preferred Stock to a number less than that of the shares then outstanding plus
the number of shares of Series B Preferred Stock issuable upon exercise of
<PAGE>
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series B Preferred Stock with respect to dividends, the holders of shares of
Series B Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash to holders of record on the last business
day of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Record Date"), commencing on the
first Quarterly Dividend Record Date after the first issuance of a share or
fraction of a share of Series B Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to, subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock (hereinafter defined) or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Record Date, or, with respect
to the first Quarterly Dividend Record Date, since the first issuance of any
share or fraction of a share of Series B Preferred Stock. In the event the
Corporation shall at any time following December 31, 1999 (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series B Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying each such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the Series
B Preferred Stock as provided in paragraph (A) above at the time it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).
(C) No dividend or distribution (other than a dividend payable in shares of
Common Stock) shall be paid or payable to the holders of shares of Common Stock
unless, prior thereto, all accrued but unpaid dividends to the date of such
dividend or distribution shall have been paid to the holders of shares of Series
B Preferred Stock.
2
<PAGE>
(D) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series B Preferred Stock from the Quarterly Dividend Record Date next
preceding the date of issue of such shares of Series B Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Record Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Record Date or is a date after the record date for
the determination of holders of shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Record Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Record Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series B Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series B Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each one
one-hundredth of a share of Series B Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time following
December 31, 1999 (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series B Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series B Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any share or
shares of Series B Preferred Stock shall be in arrears in an amount equal
to at least six full quarterly dividends (whether or not declared and
whether or not consecutive), the holders of record of the outstanding
Series B Preferred Stock shall have the exclusive right, voting separately
as a single class, to elect two directors of the Corporation at a special
3
<PAGE>
meeting of stockholders of the Corporation or at the Corporation's next
annual meeting of stockholders, and at each subsequent annual meeting of
stockholders, as provided below. At elections for such directors, the
holders of shares of Series B Preferred Stock shall be entitled to cast one
vote for each one one-hundredth of a share of Series B Preferred Stock
held.
(ii) Upon the vesting of such right of the holders of the Series B
Preferred Stock, the maximum authorized number of members of the Board of
Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the outstanding Series B
Preferred Stock as hereinafter set forth. A special meeting of the
stockholders of the Corporation then entitled to vote shall be called by
the Chairman or the President or the Secretary of the Corporation, if
requested in writing by the holders of record of not less than 10% of the
Series B Preferred Stock then outstanding. At such special meeting, or, if
no such special meeting shall have been called, then at the next annual
meeting of stockholders of the Corporation, the holders of the shares of
the Series B Preferred Stock shall elect, voting as above provided, two
directors of the Corporation to fill the aforesaid vacancies created by the
automatic increase in the number of members of the Board of Directors. At
any and all such meetings for such election, the holders of a majority of
the outstanding shares of the Series B Preferred Stock shall be necessary
to constitute a quorum for such election, whether present in person or by
proxy, and such two directors shall be elected by the vote of at least a
plurality of shares held by such stockholders present or represented at the
meeting. Any director elected by holders of shares of the Series B
Preferred Stock pursuant to this Section may be removed at any annual or
special meeting, by vote of the holders of a majority of the outstanding
shares of the Series B Preferred Stock voting as a class, with or without
cause. In case any vacancy shall occur among the directors elected by the
holders of the Series B Preferred Stock pursuant to this Section, such
vacancy may be filled by the remaining director so elected, or his or her
successor then in office, and the director so elected to fill such vacancy
shall serve until the next meeting of stockholders for the election of
directors. After the holders of the Series B Preferred Stock shall have
exercised their right to elect Directors in any default period and during
the continuance of such period, the number of Directors shall not be
further increased or decreased except by vote of the holders of Series B
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series B Preferred
---- -----
Stock.
4
<PAGE>
(iii) The right of the holders of the Series B Preferred Stock, voting
separately as a class, to elect two members of the Board of Directors of
the Corporation as aforesaid shall continue until, and only until, such
time as all arrears in dividends (whether or not declared) on the Series B
Preferred Stock shall have been paid or declared and set apart for payment,
at which time such right shall terminate, except as herein or by law
expressly provided, subject to revesting in the event of each and every
subsequent default of the character above-mentioned. Upon any termination
of the right of the holders of the shares of the Series B Preferred Stock
as a class to vote for directors as herein provided, the term of office of
all directors then in office elected by the holders of Series B Preferred
Stock pursuant to this Section shall terminate immediately. Whenever the
term of office of the directors elected by the holders of the Series B
Preferred Stock pursuant to this Section shall terminate and the special
voting powers vested in the holders of the Series B Preferred Stock
pursuant to this Section shall have expired, the maximum number of members
of the Board of Directors of the Corporation shall be such number as may be
provided for in the By-laws of the Corporation irrespective of any increase
made pursuant to the provisions of this Section.
(D) Except as set forth herein, holders of Series B Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series B Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except dividends paid ratably on the Series B Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or
5
<PAGE>
winding up) with the Series B Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series B Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Series B Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
--------------------------------------
voluntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock unless, prior thereto, the holders of shares of Series
B Preferred Stock shall have received $0.01 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series B Liquidation Preference"). Following
the payment of the full amount of the Series B Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series B
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series B Liquidation Preference by (ii)
100 (as appropriately adjusted as set forth in subparagraph C below to reflect
such events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series B Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series B
Preferred Stock and Common Stock, respectively, holders of Series B Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the
6
<PAGE>
remaining assets to be distributed in the ratio, on a per share basis, of the
Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on
a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series B Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series B Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
(C) In the event the Corporation shall at any time following December 31,
1999, (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. Redemption. The shares of a Series B Preferred Stock shall
----------
not be redeemable by the Corporation. The preceding sentence shall not limit
the ability of the Corporation to purchase or otherwise deal in such shares of
stock to the extent permitted by law.
Section 9. Ranking. The Series B Preferred Stock shall rank junior to
-------
all other series of the Corporation's preferred stock (whether with or without
par value) as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
7
<PAGE>
Section 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of a
majority of the outstanding shares of Series B Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series B Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by [Name], its [Title], and the same to be attested by [Name], its
[Title], this 18th day of December, 1999.
BURLINGTON NORTHERN SANTA FE
CORPORATION
By:_______________________________
[Name]
[Title]
(SEAL)
Attest:
By:_______________________________
[Name]
[Title]
8
<PAGE>
Exhibit B
---------
[Form of Right Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER DECEMBER 18, 2009 OR EARLIER IF THE RIGHTS EXPIRE
UNDER CERTAIN CIRCUMSTANCES OR ARE REDEEMED BY THE COMPANY. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]/*/
Right Certificate
BURLINGTON NORTHERN SANTA FE CORPORATION
This certifies that __________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of December 18, 1999 (the "Rights Agreement"),
between BURLINGTON NORTHERN SANTA FE CORPORATION, a Delaware corporation (the
"Company"), and _______________________________________, a ________ trust
company (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 p.m. (central time) on December 18, 2009, or notice of redemption or
exchange at the office of the Rights Agent (or its successors as Rights Agent)
designated for such purpose, one one-hundredth of a fully paid non-assessable
share of Junior Participating Preferred Stock, Series B, par value $0.01 per
share (the "Preferred Shares")
_________________
/*/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
of the Company at a purchase price of $100.00 per one one-hundredth of a share
(the "Purchase Price") upon presentation and surrender of this Right Certificate
with the appropriate Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of December 18, 1999, based on the Preferred Shares as constituted at
such date. Capitalized terms not defined in this Right Certificate that are
defined in the Rights Agreement shall have the meanings ascribed to them in the
Rights Agreement.
Upon the occurrence of a Triggering Event, if the Rights evidenced by this
Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) under certain circumstances specified in the
Rights Agreement, a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of any such Triggering
Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of Preferred Shares or other securities, which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under certain circumstances specified in such Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal corporate trust office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
2
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.01 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Shares Acquisition Date and (ii) the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may at the election
of the Company be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Shares or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of _________ __, ____________
ATTEST: (SEAL) BURLINGTON
NORTHERN SANTA FE CORPORATION
By: __________________ By: __________________
Name: Name:
Title: Title:
Countersigned:
________________________
By: ____________________
Authorized Signature
4
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto________________________________________
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Date: _____________, _______
_________________________
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement)
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________ , ___________ _____________________________
Signature
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the Right Certificate.)
To: BURLINGTON NORTHERN SANTA FE CORPORATION
The undersigned hereby irrevocably elects to exercise _______ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying
number:_________________________________________________________________________
________________________________________________________________________________
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying
number:_________________________________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: ______________ , ___________ _____________________________
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
<PAGE>
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ______________ , ___________ _____________________________
Signature
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
-2-
<PAGE>
Exhibit C
---------
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED
TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE
SUMMARY OF RIGHTS PLAN
----------------------
On December 18, 1999, the Board of Directors of BURLINGTON NORTHERN SANTA
FE CORPORATION (the "Company") declared a dividend distribution of one Right for
each outstanding share of common stock, par value $0.01 per share (the "Common
Stock"), of the Company to stockholders of record at the close of business on
December 31, 1999 (the "Record Date"). Except as described below, each Right,
when exercisable, entitles the registered holder to purchase from the Company
one one-hundredth of a share of Junior Participating Preferred Stock, Series B,
par value $0.01 per share (the "Preferred Stock"), at a price of $100.00 per one
one-hundredth share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and _________________________, as Rights
Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Right certificates will be
distributed. Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Shares
Acquisition Date") or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors of the Company (the "Board of
Directors") prior to the time that any person becomes an Acquiring Person)
following the commencement of (or a public announcement of an intention to make)
a tender or exchange offer if, upon consummation thereof, such person or group
would be the beneficial owner of 15% or more of such outstanding shares of
Common Stock (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced by the Common Stock certificates together with a
copy of the Summary of Rights Plan and not by separate certificates.
The Rights Agreement also provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption, expiration or termination of the
Rights), the transfer of any certificates for Common Stock, with or without a
copy of this Summary of Rights Plan, will also constitute the
<PAGE>
transfer of the Rights associated with the Common Stock represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the earliest of (i) December 18, 2009 (the "Final Expiration Date"), (ii) the
redemption of the Rights by the Company as described below, (iii) the time
immediately prior to the effectiveness of the merger of Western Merger Sub,
Inc., a Delaware corporation with and into the Company pursuant to a Combination
Agreement dated as of December 18, 1999, as such Combination Agreement may be
amended from time to time (the "Combination Agreement"), and (iv) the exchange
of all Rights for Common Stock as described below.
In the event that any person (other than the Company, its affiliates or any
person receiving newly-issued shares of Common Stock directly from the Company)
becomes the beneficial owner of 15% or more of the then outstanding shares of
Common Stock, each holder of a Right will thereafter have the right to receive,
upon exercise at the then current exercise price of the Right, Common Stock (or,
in certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right. The Rights
Agreement contains an exemption for any issuance of Common Stock by the Company
directly to any person (for example, in a private placement or an acquisition by
the Company in which Common Stock is used as consideration), even if that person
would become the beneficial owner of 15% or more of the Common Stock, provided
that such person does not acquire any additional shares of Common Stock.
In the event that, at any time following the Shares Acquisition Date, the
Company is acquired in a merger or other business combination transaction or 50%
or more of the Company's assets or earning power are sold, proper provision will
be made so that each holder of a Right will thereafter have the right to
receive, upon exercise at the then current exercise price of the Right, common
stock of the acquiring or surviving company having a value equal to two times
the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of any of the
events set forth in the preceding two paragraphs (the "Triggering Events"), any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will immediately
become null and void.
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights, are subject
to adjustment from time to time to prevent dilution, among other circumstances,
in the event of a stock dividend on, or a
2
<PAGE>
subdivision, split, combination, consolidation or reclassification of, the
Preferred Stock or the Common Stock, or a reverse split of the outstanding
shares of Preferred Stock or the Common Stock.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Stock and prior to the acquisition by such person or group of 50% or more
of the outstanding Common Stock, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group, which have become void), in
whole or in part, at an exchange ratio of one share of Common Stock per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. The Company will not be required to issue fractional shares
of Preferred Stock or Common Stock (other than fractions in multiples of one
one-hundredths of a share of Preferred Stock) and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
or Common Stock on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until the time that a
person becomes an Acquiring Person, the Board of Directors may redeem the Rights
in whole, but not in part, at a price of $0.01 per Right (the "Redemption
Price"), which may (at the option of the Company) be paid in cash, shares of
Common Stock or other consideration deemed appropriate by the Board of
Directors. Upon the effectiveness of any action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The provisions of the Rights Agreement may be amended by the Company,
except that any amendment adopted after the time that a person becomes an
Acquiring Person may not adversely affect the interests of holders of Rights.
As of December 15, 1999, there were 454,945,828 shares of Common Stock
outstanding and 30,048,057 shares of Common Stock reserved for issuance under
employee benefit plans. Each outstanding share of Common Stock on December 31,
1999 will receive one Right. Three million (3,000,000) shares of Preferred
Stock will be reserved for issuance in the event of exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the
3
<PAGE>
Rights being redeemed or a substantial number of Rights being acquired, and
under certain circumstances the Rights beneficially owned by such a person or
group may become void. The Rights should not interfere with the transaction
contemplated by the Combination Agreement or any other merger or other business
combination approved by the Board of Directors because, if the Rights would
become exercisable as a result of such merger or business combination, the Board
of Directors may, at its option, at any time prior to the time that any Person
becomes an Acquiring Person, redeem all (but not less than all) of the then
outstanding Rights at the Redemption Price.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
4
<PAGE>
Exhibit H
---------
FORM OF
RESTATED
CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN RAILWAYS, INC.
FIRST: The name of the corporation is North American Railways, Inc. (the
"Corporation").
SECOND: The registered office of the Corporation in the State of Delaware
is located at 1209 Orange Street in the City of Wilmington, County of New
Castle, and the name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The head office of the Corporation shall at all times be situated
in the Montreal Urban Community, Quebec, Canada. No amendment to this Restated
Certificate of Incorporation shall amend, alter, change or repeal any of the
provisions of this Article THIRD unless such amendment shall receive (i) the
affirmative vote of all of the directors of the Corporation, other than any
directors who are unable to participate in the board of directors' deliberations
due to medical reasons, and (ii) the affirmative vote of not less than 85% of
the votes cast at a meeting of stockholders at which a quorum is present,
provided that such number of affirmative votes constitutes at least a majority
of the votes entitled to be cast on such amendment by holders of the
Corporation's capital stock.
FOURTH: The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law. The
Corporation shall have no corporate power or authority to effectuate any
amendment to Article THIRD unless, prior to such effectuation, and prior to
approval by the board of directors of the Corporation, the board of directors of
the Corporation shall have received a written opinion from a Canadian law firm
of national standing retained by the board of directors of the Corporation that
such amendment would not have a significant risk of resulting in a violation of
Canadian law. The Corporation shall have no corporate power or authority to
effectuate any amendment to Article FIFTH, Section I, subsection 3 unless, prior
to such effectuation, and prior to approval by the board of directors of the
Corporation, the board of directors of the Corporation shall have (i) received a
written opinion from a Canadian law firm of national standing retained by the
board of directors of the Corporation that such amendment would not have a
significant risk of resulting in a violation of Canadian law and (ii) concluded
that Canadian National Railway Company ("CN") and the Corporation should no
longer be operated as a single economic enterprise. The Corporation shall have
no corporate power or authority to effectuate any amendment to Article SIXTH
unless, prior to effectuation, and prior to approval by the board of directors
of the Corporation,
<PAGE>
the board of directors of the Corporation shall have received a written opinion
from a Canadian law firm of national standing retained by the board of directors
of the Corporation that such amendment would not have a significant risk of
resulting in a violation of Canadian law. The Corporation shall have no
corporate power or authority to effectuate any amendment to Article SEVENTH
unless, prior to effectuation, and prior to approval by the board of directors
of the Corporation, the board of directors of the Corporation shall have
concluded that CN and the Corporation should no longer be operated as a single
economic enterprise.
FIFTH: The total number of shares of all classes of capital stock that the
Corporation shall have authority to issue is [ ] shares, of
which (a) [ ] shares shall be common stock, par value $0.01 per
share ("Common Stock"), (b) one share shall be special voting stock, par value
$0.01 per share ("Special Voting Stock"), and (c) [ ] shares shall
be preferred stock, par value $0.01 per share ("Preferred Stock").
SECTION I: PROVISIONS RELATING TO COMMON STOCK
1. Voting Rights. At all times, each holder of Common Stock of the
Corporation shall be entitled to one vote for each share of Common Stock
standing in the name of such holder on the books of the Corporation. In respect
of all matters concerning the voting of shares of the Corporation, except as
required by law or as set forth in this Article FIFTH, the Common Stock and the
Special Voting Stock shall vote as a single class and such voting rights shall
be identical in all respects.
2. Common Stock to be Reserved. The Corporation shall at all times
reserve and keep available out of its authorized Common Stock, solely for
purposes of issuance upon the exchange of CN Exchangeable Shares (as defined in
the Combination Agreement, dated as of December 18, 1999 (the "Combination
Agreement"), by and among CN, Burlington Northern Santa Fe Corporation, the
Corporation, North American Railways, Inc. and Western Merger Sub, Inc.), such
number of shares of Common Stock as shall then be issuable upon the conversion
of (i) all outstanding CN Exchangeable Shares and (ii) all CN Exchangeable
Shares that are issuable upon the exercise of all outstanding rights to acquire
CN Exchangeable Shares.
3. Transfer Restrictions; Legend. (a) No shares of Common Stock of the
Corporation shall be issued or transferred, and no issuance or transfer shall be
reflected on the books of the Corporation, unless a simultaneous issuance or
transfer of a like number of CN Voting Shares (as defined in the Combination
Agreement) is made to the same holder and recorded on the books of CN or, in the
case of an exchange of CN Exchangeable Shares for shares of Common Stock, the
holder of such CN Exchangeable Shares will continue to be the holder of the
corresponding CN Voting Shares upon consummation of such exchange. The only
certificate representing shares of Common Stock that a holder of Common Stock
shall be entitled to receive shall be a certificate representing both the shares
of Common Stock held by such holder and the CN Voting Shares held by such
holder.
2
<PAGE>
(b) Each certificate representing shares of Common Stock shall contain or
have affixed thereto a legend in form and substance approved by the board of
directors of the Corporation with respect to the transfer restriction set forth
in this subsection (3).
(c) No amendment to this Restated Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of this subsection 3 unless such
amendment shall receive (i) the affirmative vote of all of the directors of the
Corporation, other than any directors who are unable to participate in the board
of directors' deliberations due to medical reasons, and (ii) the affirmative
vote of not less than 85% of the votes cast at a meeting of stockholders at
which a quorum is present, provided that such number of affirmative votes
constitutes at least a majority of the votes entitled to be cast on such
amendment by holders of the Corporation's capital stock.
4. Appraisal Rights. Holders of Common Stock shall be entitled to
appraisal rights under Section 262 of the Delaware General Corporation Law with
respect to any matter for which holders of CN Exchangeable Shares are entitled
to appraisal or dissenters' rights under the Canadian Business Corporations Act;
provided, however, that there shall be no appraisal rights with respect to the
Merger (as defined in the Combination Agreement) or the other transactions
contemplated by the Combination Agreement.
5. Acknowledgments. (a) Each holder of Common Stock acknowledges that
the Co-Operation Agreement (as defined in Article NINTH) provides, in part, that
CN shall not, without the prior approval of the Corporation and the holders of
Common Stock:
(i) issue or distribute CN Exchangeable Shares (or securities
exchangeable for or convertible into or carrying rights to acquire CN
Exchangeable Shares) to the holders of all or substantially all of the then
outstanding CN Exchangeable Shares by way of stock dividend or other
distribution, other than an issue of CN Exchangeable Shares to holders of
CN Exchangeable Shares who exercise an option to receive dividends in CN
Exchangeable Shares in lieu of receiving cash dividends;
(ii) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding CN Exchangeable Shares
entitling them to subscribe for or to purchase CN Exchangeable Shares; or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding CN Exchangeable Shares:
(A) shares or securities of CN of any class other than CN
Exchangeable Shares;
(B) rights, options or warrants other than those referred to in
subsection 5(a)(ii);
(C) evidences of indebtedness of CN; or
3
<PAGE>
(D) assets of CN;
unless, in the case of subsections 5(a)(i) and (ii), a corresponding issue or
distribution of units comprised of shares of Common Stock and CN Voting Shares
or rights, options or warrants to acquire units comprised of shares of Common
Stock and CN Voting Shares, as applicable, is made or, in the case of subsection
5(a)(iii), the economic equivalent on a per share basis of such other shares or
securities, rights, options, warrants, evidences of indebtedness or other assets
is issued or distributed simultaneously to holders of Common Stock or unless, in
the case of a stock dividend payable in CN Exchangeable Shares, in lieu of such
stock dividend, the Corporation and CN effect a corresponding stock dividend
payable in shares of Common Stock and CN Voting Shares.
(b) Each holder of Common Stock acknowledges that the Co-Operation
Agreement further provides, in part, that CN shall not, without the prior
approval of the Corporation and the holders of Common Stock:
(i) subdivide, redivide or change the then outstanding CN Exchangeable
Shares into a greater number of CN Exchangeable Shares;
(ii) reduce, combine, consolidate or change the then outstanding CN
Exchangeable Shares into a lesser number of CN Exchangeable Shares; or
(iii) reclassify or otherwise change the CN Exchangeable Shares or
effect an amalgamation, merger, reorganization or other transaction
affecting the CN Exchangeable Shares;
unless, in the case of subsections 5(b)(i) and (ii) above, the same or, in the
case of subsection 5(b)(iii) above, the same or an economically equivalent
change is simultaneously made to, or in the rights of the holders of, Common
Stock and CN Voting Shares. The Co-Operation Agreement further provides, in
part, that the aforesaid provisions of the Co-Operation Agreement shall not be
changed without the approval of the holders of Common Stock.
SECTION II: PROVISIONS RELATING TO SPECIAL VOTING STOCK
1. Voting Rights. At all times, the one share of Special Voting Stock
shall be entitled at any relevant date to that number of votes (including for
purposes of determining the presence of a quorum) equal to the number of CN
Exchangeable Shares outstanding as of the applicable record date of the
stockholder meeting at which any matter is to be considered. In respect of all
matters concerning the voting of shares of the Corporation, except as required
by law and except as set forth in this Article FIFTH, the Common Stock and the
Special Voting Stock shall vote as a single class and such voting rights shall
be identical in all respects.
2. No Dividends. No dividends shall be paid to the holder of the Special
Voting Stock.
4
<PAGE>
3. Liquidation Rights. The holder of the share of Special Voting Stock
shall be entitled to receive $1.00 upon the liquidation, dissolution or winding-
up of the Corporation in preference to any shares of Common Stock of the
Corporation, but only after the liquidation preference of any shares of
Preferred Stock of the Corporation has been paid.
4. No Conversion. Except as provided in subsection (5), the Special
Voting Stock is not convertible into any other class or series of the capital
stock of the Corporation or into cash, property or other rights, and may not be
purchased or redeemed by the Corporation.
5. Redemption; Cancellation. At such time as the Special Voting Stock
has no votes attached to it because there are no CN Exchangeable Shares
outstanding, the Special Voting Stock shall be redeemable, and shall be
redeemed, by the Corporation for par value and canceled.
6. Restrictions. So long as the share of Special Voting Stock is
outstanding, the Corporation shall fully comply with all contractual obligations
of the Corporation associated with such CN Exchangeable Shares. So long as any
CN Exchangeable Shares shall be outstanding, the number of authorized shares of
Special Voting Stock shall not be increased or decreased and no other term of
the Special Voting Stock shall be amended, without the affirmative vote of at
least a majority of the votes entitled to be cast on such amendment by holders
of CN Exchangeable Shares.
SECTION III: PROVISIONS RELATING TO PREFERRED STOCK
The board of directors is expressly authorized to provide for the issue of
all or any shares of the Preferred Stock, in one or more series, and to fix for
each such series such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
board of directors of the Corporation providing for the issue of such series (a
"Preferred Stock Designation") and as may be permitted by the Delaware General
Corporation Law. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of the Corporation's capital stock
entitled to vote generally in the election of directors (the "Voting Stock"),
voting together as single class, without a separate vote of the holders of the
Preferred Stock, or any series thereof, unless a vote of any such holders is
required pursuant to any Preferred Stock Designation.
SIXTH: Restrictions on the transferability of the capital stock of the
Corporation, in addition to those restrictions set forth elsewhere in this
Amended and Restated Certificate of Incorporation, are as follows:
1. Definitions. For purposes of this Article SIXTH, the following terms
have the following meanings:
5
<PAGE>
"Act" means An Act to provide for the continuance of the Canadian National
Railway Company under the Canada Business Corporations Act and for the issuance
and sale of shares of the Company to the public, S.C. 1995, c.24 enacted on July
13, 1995;
"Aggregate Votes" means the aggregate of the votes attached to all voting
shares of the Corporation that may ordinarily be cast to elect directors of the
Corporation;
"associate" has the meaning set forth in subsection 6 of this Article
SIXTH;
"control" has the meaning set forth in subsection 7 of this Article SIXTH;
"corporation" includes a body corporate, partnership and unincorporated
organization;
"Maximum Individual Holdings" means voting shares to which are attached
fifteen percent (15%) of the Aggregate Votes;
"Minister" means the Minister of Transport or such other member of the
Queen's Privy Council for Canada as may be designated by the Governor in Council
as the Minister for the purposes of the Act;
"Ownership Rights" means, with respect to voting shares of the Corporation,
all rights attaching thereto, including the rights to vote at any meeting of
stockholders, to receive any dividends declared thereon by the Corporation, and
to receive the remaining property of the Corporation upon liquidation,
dissolution or winding-up of the Corporation (but does not include the right to
receive proceeds of sale pursuant to subsection 5 of this Article SIXTH);
"person" includes an individual, corporation, government, government
agency, trustee, executor, administrator and other legal representative; and
"voting share" means a share of the Corporation carrying voting rights
under all circumstances or under some circumstances that have occurred and are
continuing, and includes a security currently convertible into such a share and
currently exercisable options and rights to acquire such a share or such a
convertible security.
2. Constraints on Issue and Transfer. The Corporation shall not (a)
accept any subscription for its voting shares; (b) issue any of its voting
shares; or (c) register or otherwise recognize the transfer of any of its voting
shares if, as a result of such subscription, issue, transfer, purchase or
acquisition, voting shares to which are attached more than fifteen percent (15%)
of the Aggregate Votes are or would be held, beneficially owned or controlled,
directly or indirectly, by any one person together with the associates of such
person.
3. Constraints on Ownership Rights. No person, together with his, her or
its associates, shall hold, beneficially own or control, directly or indirectly,
voting shares to which are attached more than fifteen percent (15%) of the
Aggregate Votes. Subject to subsections 4(a) and 4(b) of this Article SIXTH,
the Corporation shall refuse to recognize all Ownership Rights
6
<PAGE>
that would otherwise be attached to any voting shares held, beneficially owned
or controlled, directly or indirectly, in excess of the permitted Maximum
Individual Holdings by any person, together with such person's associates.
4. Limitation on Voting Rights; Dividend Forfeiture. (a) Where the
total number of voting shares held, beneficially owned or controlled, directly
or indirectly, by any one person together with such person's associates exceeds
the Maximum Individual Holdings, no person shall, in person or by proxy,
exercise the voting rights attached to the voting shares held, beneficially
owned or controlled, directly or indirectly, by such person or such person's
associates. If the Corporation redeems, purchases for cancellation or otherwise
acquires voting shares, and the result of such action is that any person and the
associates of that person who, prior to such action, were not in contravention
of the Maximum Individual Holdings are, after such action, in contravention,
then, notwithstanding any other provision of this Article SIXTH, the sole
consequence of such action to that person and the associates of that person, in
respect of the voting shares of that person and of the associates of that person
held, beneficially owned or controlled at the time of such action, shall be that
the number of votes attached to those voting shares shall be reduced to a number
that is the largest whole number of votes that may be attached to the voting
shares which that person and the associates of that person could hold,
beneficially own or control from time to time in accordance with the Maximum
Individual Holdings.
(b) Where the total number of voting shares held, beneficially owned or
controlled, directly or indirectly, by any one person together with his, her or
its associates exceeds the Maximum Individual Holdings, the percentage of any
and all dividends attributable to the percentage of voting shares exceeding the
Maximum Individual Holdings shall be forfeited, including any cumulative
dividend, and the amount of dividend so forfeited shall not become payable
thereafter to any person for any reason whatsoever; provided, however, that,
notwithstanding any other provision of this Article SIXTH:
(i) the directors of the Corporation may determine to pay a dividend
or to make any other distribution on voting shares that would otherwise be
prohibited by any other provision of this Article SIXTH where the
contravention of the Maximum Individual Holdings that gave rise to the
prohibition was inadvertent or of a technical nature or it would otherwise
be inequitable not to pay the dividend or make the distribution; and
(ii) where a dividend has not been paid or any other distribution has
not been made on voting shares of a person as a result of a directors'
determination of a contravention of the Maximum Individual Holdings, the
directors of the Corporation shall declare and pay the dividend or make the
distribution to the relevant person if they subsequently determine that no
such contravention occurred.
(c) Notwithstanding any other provision of this Article SIXTH, a
contravention of the Maximum Individual Holdings shall have no consequences
except those that are expressly provided for in this Article SIXTH. For greater
certainty, but without limiting the generality of
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the foregoing, (i) no transfer, issue or ownership of, and no title to, voting
shares; (ii) no resolution of stockholders; and (iii) no act of the Corporation,
including any transfer of property to or by the Corporation, shall be invalid or
otherwise affected by any contravention of the Maximum Individual Holdings.
5. Sale of Constrained Shares. Without limiting any of the provisions of
this Article SIXTH (but subject to subsection 4(a) of this Article SIXTH) the
Corporation may, for the purposes of enforcing any constraint imposed pursuant
to subsection 2 of this Article SIXTH, sell, as if it were the owner thereof,
any voting shares that are owned, or that the directors determine may be owned,
by any person or persons, contrary to such constraint. Such sale shall be
conducted in accordance with the procedures set forth in Part VI of the Canadian
Business Corporations Act and Part VII of the Canadian Business Corporations
Regulations with necessary modifications, as if such provisions applied to the
sale of such voting shares, and the net proceeds of the sale thereof shall be
remitted to the person or persons entitled thereto; provided, however, that (i)
in the event the Corporation elects to transfer the proceeds of any such sale to
a trust company, the trust company may be either a United States or Canadian
trust company and (ii) in the event the proceeds of any such sale are not
claimed by a person entitled to receive such proceeds within ten years after the
date of such sale, the Corporation shall be entitled to retain such proceeds.
6. Associates. (a) For the purposes of this Article SIXTH, a person is
an "associate" of another person if:
(i) one is a corporation of which the other is an officer or director;
(ii) one is a corporation that is controlled by the other or by a
group of persons of which the other is a member;
(iii) one is a partnership of which the other is a partner;
(iv) one is a trust of which the other is a trustee;
(v) both are corporations controlled by the same person;
(vi) both are members of a voting trust that relates to voting shares;
(vii) both, in the reasonable opinion of the directors of the
Corporation, are parties to an agreement or arrangement, a purpose of which
is to require them to act in concert with respect to their interests,
direct or indirect, in the Corporation or are otherwise acting in concert
with respect to those interests; or
(viii) both are at the same time associates, within the meaning of
any of clauses (i) to (viii), of the same person.
8
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(b) Notwithstanding subsection 6(a) of this Article SIXTH, for the purposes
of this subsection 6:
(i) where a person who, but for this subsection 6(b), would be an
associate of another person submits to the Corporation such declaration as
required by the directors stating that:
(A) no voting shares held or to be held by the declarant are or
will be, to the declarant's knowledge, held in the right of, for the
use or benefit of, or under the control of, any other person of which,
but for this subsection 6(b), the declarant would be an associate, and
(B) the declarant is not acting and will not act in concert with
any other person with respect to their interests, direct or indirect,
in the Corporation,
the declarant and that other person are not associates so long as the
directors of the Corporation are satisfied that the statements in the
declaration are being complied with and that there are no other reasonable
grounds for disregarding the declaration; and
(ii) two corporations are not associates pursuant to subsection 6(a)
of this Article SIXTH by reason only that, under such subsection 6(a), each
is an associate of the same individual; and
(iii) where it appears from the stock ledger of the Corporation that
any person holds, beneficially owns or controls voting shares to which are
attached not more than the lesser of two one-hundredths of one percent of
the votes that may ordinarily be cast to elect directors of the Corporation
and five thousand such votes, that person is not an associate of anyone
else and no one else is an associate of that person.
(c) For greater certainty, no person is presumed to be an associate of any
other person solely by reason that one of them has given the other the power to
vote or direct the voting of voting shares at a meeting of the holders of the
voting shares pursuant to a revocable proxy where the proxy is solicited solely
by means of a proxy statement issued in a public solicitation of proxies that is
made in respect of all voting shares and in accordance with applicable law.
7. Control. For purposes of this Article SIXTH, "control" and any
derivative thereof means control in any manner that results in control in fact,
whether directly through the ownership of securities or indirectly through a
trust, an agreement or arrangement, the ownership of any body corporate or
otherwise, and, without limiting the generality of the foregoing:
(a) a body corporate is controlled by a person if:
(i) securities of the body corporate to which are attached more
than fifty percent (50%) of the votes that may be cast to elect
directors of the body
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corporate are held, otherwise than by way of security only, by or for
the benefit of that person; and
(ii) the votes attached to those securities are sufficient, if
exercised, to elect a majority of the directors of the body corporate;
and
(b) a partnership or unincorporated organization is controlled by a person
if an ownership interest therein representing more than fifty percent (50%) of
the assets of the partnership or organization is held, otherwise than by way of
security only, by or for the benefit of that person.
8. Joint Ownership. For the purposes of this Article SIXTH, where voting
shares are held, beneficially owned or controlled by several persons jointly,
the number of voting shares held, beneficially owned or controlled by any one
such person shall include the number of voting shares held, beneficially owned
or controlled jointly with such other persons.
9. Exceptions. (a) Nothing in this Article SIXTH shall be construed to
apply to such a holder in respect of voting shares that:
(i) are held by the Minister in trust for Her Majesty in right of
Canada;
(ii) are held by one or more underwriters solely for the purpose of
distributing the shares to the public or in connection therewith, which
shall include, without limitation, any voting shares acquired through the
exercise of an over-allotment option or in stabilization transactions and,
for the purposes of calculating the percentage of voting shares of the
Corporation held, beneficially owned or controlled by any underwriter
during the period of any distribution of shares (such period not
terminating for the purposes of this provision while any over-allotment
option remains unexercised and unexpired), shall not include any shares
owned or subject to acquisition by such underwriter which have at the time
of such calculation been resold;
(iii) are held by any person that is acting in relation to the shares
solely in its capacity as an intermediary in the payment of funds or the
delivery of securities or both, in connection with trades in securities and
that provides centralized facilities for the clearing of trades in
securities, including, without limitation, intermediaries such as The
Canadian Depositary for Securities Limited and The Depository Trust
Company;
(iv) are held by way of security only; or
(v) are held by any custodian, depositary or other agent appointed
under an instalment receipt agreement or other agreement pursuant to which,
among other things, voting shares are purchased on an instalment basis.
(b) None of the restrictions set forth in this Article SIXTH shall apply to
the Special Voting Stock; provided, however, that the voting rights of the
holder of Special Voting Stock
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<PAGE>
shall be included for purposes of calculating the number of Aggregate Votes;
provided further, that any holder of voting shares shall be deemed, for purposes
of determining compliance with the requirements of subsections 2 and 3 of this
Article SIXTH, to hold an additional number of voting shares equal to the number
of votes attached to the Special Voting Share of which such holder together with
such holder's associates has the right to direct the casting as a result of
holding CN Exchangeable Shares and, if any such holder, as a result thereof, is
not in compliance with subsection 3 of this Article SIXTH, subsection 4 of this
Article SIXTH shall be applicable to the votes attached to the Special Voting
Share of which such holder, together with such holder's associates, has the
right to direct.
10. By-Laws. (a) Subject to applicable law, the board of directors of
the Corporation may make, amend or repeal any by-laws required to administer the
constrained share provisions set forth in this Article SIXTH, including any by-
laws to determine the circumstances in which any declarations are required,
their form and the times when they are to be furnished.
(b) Where a person is required to furnish a declaration pursuant to a by-
law made under subsection 10(a) of this Article SIXTH, the board of directors of
the Corporation may refuse to register a transfer of a voting share in his, her
or its name or to issue a voting share to him, her or it until that person has
furnished the declaration.
11. Powers of Directors. (a) Subject to applicable law, in the
administration of this Article SIXTH, the directors of the Corporation shall
enjoy, in addition to the powers set forth in this Article SIXTH, all of the
powers necessary or desirable, in their opinion, to carry out the intent or
purpose of this Article SIXTH.
(b) If the board of directors of the Corporation, acting in good faith,
determines that any persons are parties to an agreement or arrangement, a
purpose of which is to require them to act in concert with respect to their
interest, direct or indirect, in voting shares, the board of directors shall be
entitled to treat such persons as associates for the purposes of this Article
SIXTH.
(c) In administering the provisions of this Article SIXTH, the directors of
the Corporation may rely upon:
(i) a statement made in a declaration referred to in subsection 10 of
this Article SIXTH;
(ii) the knowledge of a director, officer, employee or agent of the
Corporation; and
(iii) the opinion of counsel to the Corporation or of other qualified
advisors.
(d) Wherever in this Article SIXTH it is necessary to determine the opinion
of the board of directors of the Corporation, such opinion shall be expressed
and conclusively
11
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evidenced by a resolution of the directors of the Corporation duly adopted,
including a resolution in writing executed pursuant to Section 141(f) of the
Delaware General Corporation Law.
12. Disclosure Required. Each of the following documents issued or
published by the Corporation shall indicate conspicuously the general nature of
the constraints on issue, transfer and ownership of its voting shares contained
in this Article SIXTH:
(a) a certificate representing a voting share;
(b) a proxy statement; and
(c) a prospectus, statement of material facts, registration statement or
similar document.
13. Amendments to this Section. No amendment to this Restated Certificate
of Incorporation shall amend, alter, change or repeal any of the provisions of
this Article SIXTH unless such amendment shall receive (i) the affirmative vote
of all of the directors of the Corporation, other than any directors who are
unable to participate in the board of directors' deliberations due to medical
reasons, and (ii) the affirmative vote of not less than 85% of the votes cast at
a meeting of stockholders at which a quorum is present, provided that such
number of affirmative votes constitutes at least a majority of the votes
entitled to be cast on such amendment by holders of the Corporation's capital
stock. Notwithstanding the immediately preceding sentence, the provisions of
this Article SIXTH may be amended from time to time to conform with any
amendments made to the provisions of the Act if any such amendment to this
Article SIXTH receives (i) the affirmative vote of a majority of the directors
of the Corporation present at a meeting at which a quorum is present and (ii)
the affirmative vote of a majority of the votes entitled to be cast on any such
amendment by holders of the Corporation's capital stock.
SEVENTH: No person shall be qualified for election or appointment as a
director of the Corporation unless he or she is also a member of the board of
directors of CN or unless he or she is elected or appointed to the board of
directors of CN simultaneously with his or her appointment or election as a
director of the Corporation. No amendment to this Restated Certificate of
Incorporation shall amend, alter, change or repeal any of the provisions of this
Article SEVENTH unless such amendment shall receive (i) the affirmative vote of
all of the directors of the Corporation, other than any directors who are unable
to participate in the board of directors' deliberations due to medical reasons,
and (ii) the affirmative vote of not less than 85% of the votes cast at a
meeting of stockholders at which a quorum is present, provided that such number
of affirmative votes constitutes at least a majority of the votes entitled to be
cast on such amendment by holders of the Corporation's capital stock.
EIGHTH: No holder of capital stock of the Corporation shall be entitled as
a matter of right to subscribe for, purchase or receive any part of any new or
additional issue of capital stock of any class or any options or warrants for
such stock or any rights to subscribe to or purchase such stock or securities
convertible into or exchangeable for such stock, whether now or
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<PAGE>
hereafter authorized, or whether issued for money, for a consideration other
than money, or for no consideration.
NINTH: The Corporation shall take all such actions and do all such things
as shall be necessary or advisable to perform and comply with, and to ensure
performance and compliance by its subsidiaries with, all provisions of the Co-
Operation Agreement, dated as of _________, ___, as it may be amended from time
to time in accordance with its terms (the "Co-Operation Agreement"), by and
between the Corporation and CN applicable to the Corporation and its
subsidiaries, including, without limitation, taking all such actions and doing
all such things as shall be necessary or advisable to enforce to the fullest
extent possible for the direct benefit of the Corporation all rights and
benefits in favor of the Corporation under or pursuant to the Co-Operation
Agreement. The board of directors of the Corporation may make any amendments to
the Co-Operation Agreement only in accordance with Article 6 of the Co-Operation
Agreement.
TENTH: Any action by stockholders of the Corporation shall be taken at a
meeting of stockholders and no action may be taken by written consent of
stockholders entitled to vote upon such action. With respect to any matter
submitted to the stockholders of the Corporation that is also submitted to the
stockholders of CN, the meeting of stockholders at which such matter is
considered shall be held on the same day and at the same location as the meeting
at which such matter is considered by the stockholders of CN and the record date
for determining the stockholders of the Corporation entitled to vote at such
meeting shall be the same as the record date for determining the stockholders of
CN entitled to vote at such CN meeting.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
law, the board of directors of the Corporation is expressly authorized:
(a) To adopt, amend or repeal the by-laws of the Corporation subject to the
power of the stockholders of the Corporation having voting power to adopt by-
laws and to amend or repeal by-laws adopted or amended by the board of
directors;
(b) To remove at any time any officer elected or appointed by the board of
directors by such vote of the board of directors as may be provided for in the
by-laws. Any other officer of the Corporation may be removed at any time by a
vote of the board of directors, or by any committee or superior officer upon
whom such power of removal may be conferred by the by-laws or by a vote of the
board of directors;
(c) To establish bonus, profit sharing, stock option, stock purchase,
retirement or other types of incentive or compensation plans for the employees
(including officers and directors) of the Corporation and to fix the terms of
such plans and to determine, or prescribe the method for determining, the
persons to participate in any such plans and the amount of their respective
participation; and
(d) From time to time to determine whether and to what extent, and at what
time and places and under what conditions and regulations, the accounts and
books of the Corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders;
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and no stockholder shall have any right to inspect any account or book or
document of the Corporation, except as conferred by the laws of the State of
Delaware or as authorized by the board of directors.
TWELFTH: To the full extent that the Delaware General Corporation Law, as
it exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of directors, a director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. Any amendment to or repeal of this
Article TWELFTH shall not adversely affect any right or protection of a director
of the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
THIRTEENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder of the Corporation or
on the application of any receiver or receivers appointed for the Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
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Exhibit I
---------
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BURLINGTON NORTHERN SANTA FE CORPORATION
1. The name of the Corporation is Burlington Northern Santa Fe
Corporation.
2. The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
3. The nature of the business or purpose to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware ("GCL").
4. The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000) shares of common stock with a par
value of one cent ($.01) per share.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
make, adopt, alter, amend or repeal the By-Laws of the Corporation.
7. A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except (i) for any breach of a director's duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the GCL as it may from time to time be amended or
supplemented or any successor provision thereto; or (iv) for any transaction
from which a director derived an improper personal benefit.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of any person thereunder with respect
to any act or omission occurring prior to or at the time of such repeal or
modification.
<PAGE>
8. Meetings of the stockholders may be held within or without the State
of Delaware, as may be designated by or in the manner provided in the By-Laws of
the Corporation. The books of the Corporation may be kept (subject to the
provisions of any law or regulation) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation. Elections of directors need not be by written
ballot unless the By-Laws of the Corporation shall so provide.
9. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
<PAGE>
Exhibit J
---------
FORM OF
BY-LAWS
OF
BURLINGTON NORTHERN SANTA FE CORPORATION
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the City
of Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as shall be designated
by the Board of Directors. In the absence of a designation of a place for any
such meeting by the Board of Directors, each such meeting shall be held at the
principal office of the Corporation.
Section 2. Annual Meetings. An annual meeting of stockholders shall be
held for the purpose of electing directors and transacting such other business
as may properly be brought before the meeting. The date of the annual meeting
shall be determined by the Board of Directors.
Section 3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by the Certificate of
Incorporation or by law, may be called by the Chief Executive Officer or by the
President and shall be called by the Secretary at the direction of a majority of
the Board of Directors, or at the request in writing delivered to the Chief
Executive Officer, the President or the Secretary of the Corporation of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall be given not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to vote at such meeting. The notice of
<PAGE>
any special meeting of stockholders shall state the purpose or purposes for
which the meeting is called. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice. Neither the
business to be transacted at, nor the purpose of, an annual or special meeting
of stockholders need be specified in any written waiver of notice.
Section 5. Quorum; Adjournments. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise required by
the Certificate of Incorporation or the Delaware General Corporation Law as from
time to time in effect (the "Delaware Law"). If a quorum is not represented,
the holders of the stock present in person or represented by proxy at the
meeting and entitled to vote thereat shall have power, by the affirmative vote
of the holders of a majority of such stock, to adjourn the meeting to another
time and/or place, without notice other than announcement at the meeting, except
as hereinafter provided, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. Withdrawal of stockholders from any meeting shall not
cause the failure of a duly constituted quorum at such meeting.
Section 7. Voting. (a) At all meetings of the stockholders, each
stockholder of the Common Stock shall be entitled to vote, in person, or by
proxy appointed in an instrument in writing subscribed by the stockholder or
otherwise appointed in accordance with Section 212 of the Delaware Law, each
share of voting stock owned by such stockholder of record on the record date for
the meeting. Each stockholder of the Common Stock shall be entitled to one vote
for each share of voting stock held by such stockholder, unless otherwise
provided in the Delaware Law or the Certificate of Incorporation.
(b) When a quorum is present at any meeting, the affirmative vote of the
holders of a majority of the Common Stock having voting power present in person
or represented by proxy and voting shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of law or
of the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Any stockholder who is in attendance at a meeting of stockholders either in
person or by proxy, but who abstains from the vote on any matter, shall not be
deemed present or represented at such meeting for purposes of the preceding
sentence with respect to such vote, but shall be deemed present or represented
at such meeting for all other purposes.
Section 8. Informal Action by Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the
<PAGE>
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of its Board of
Directors, which may exercise all such powers of, and do all such acts and
things as may be done by, the Corporation and do all such lawful acts and things
as are not by law or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
Section 2. Number, Qualification and Tenure. The Board of Directors of
the Corporation shall consist of not less than one (1) member and not more than
ten (10) members. Within the limit above specified, the number of directors
shall be determined from time to time by resolution of the Board of Directors.
The directors shall be elected at the annual meeting of the stockholders, except
as provided in the Certificate of Incorporation or Section 3 of this Article,
and each director elected shall hold office until his or her successor is
elected and qualified or until his or her earlier death, termination,
resignation or removal from office. Directors need not be stockholders.
Section 3. Vacancies and Newly-Created Directorships. Vacancies and newly
created directorships resulting from any increase in the number of directors may
be filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director, and each director so chosen shall hold
office until his or her successor is elected and qualified or until his or her
earlier death, termination, resignation, retirement, disqualification or removal
from office. If there are no directors in office, then an election of directors
may be held in the manner provided by law.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Meetings. The Board of Directors shall hold a regular meeting,
to be known as the annual meeting, immediately following each annual meeting of
the stockholders. Other regular meetings of the Board of Directors shall be
held at such time and place as shall from time to time be determined by the
Board. No notice of regular meetings need be given, other than by announcement
at the immediately preceding regular meeting. Special meetings of the Board may
be called by the Chief Executive Officer, by the President or by the Secretary
on the written request of a majority of the Board of Directors. Notice of any
special meeting of the Board shall be given at least two days prior thereto,
either in writing, or telephonically if confirmed promptly in writing, to each
director at the address shown for such director on the records of the
Corporation.
Section 6. Waiver of Notice; Business and Purpose. Notice of any meeting
of the Board of Directors may be waived in writing signed by the person or
persons entitled to such notice either before or after the time of the meeting.
The attendance of a director at any meeting shall constitute a waiver
<PAGE>
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 and at the beginning of the meeting
records such objection with the person acting as secretary of the meeting and
does not thereafter vote on any action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board need be specified in the notice or waiver of notice of such
meeting, unless specifically required by the Delaware Law.
Section 7. Quorum and Manner of Acting. At all meetings of the Board of
Directors a majority of the total number of directors shall constitute a quorum
for the transaction of business. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. 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, except as may be otherwise specifically provided by the
Delaware Law or by the Certificate of Incorporation. Withdrawal of directors
from any meeting shall not cause the failure of a duly constituted quorum at
such meeting. A director who is in attendance at a meeting of the Board of
Directors but who abstains from the vote on any matter shall be counted for
purposes of constituting a quorum but shall not be deemed present at such
meeting for purposes of determining the act of a majority of the directors with
respect to such vote, but shall be deemed present at such meeting for all other
purposes.
Section 8. Organization. The Chairman of the Board, if elected, shall act
as chairman at all meetings of the Board of Directors. If the Chairman of the
Board is not elected or, if elected, is not present, the Vice Chairman, if any,
or if no such Vice Chairman is present, a director chosen by a majority of the
directors present, shall act as chairman at such meeting of the Board of
Directors.
Section 9. Committees. The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate one or more directors to constitute
an Executive Committee. The Board of Directors, by resolution adopted by a
majority of the whole Board, may create one or more other committees and appoint
one or more directors to serve on such committee or committees. Each director
appointed to serve on any such committee shall serve, unless the resolution
designating the respective committee is sooner amended or rescinded by the Board
of Directors, until the next annual meeting of the Board or until their
respective successors are designated. The Board of Directors, by resolution
adopted by a majority of the whole Board, may also designate additional
directors as alternate members of any committee to serve as members of such
committee in the place and stead of any regular member or members thereof who
may be unable to attend a meeting or otherwise unavailable to act as a member of
such committee. In the absence or disqualification of a member and all
alternate members designated to serve in the place and stead of such member, 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 another director to act at the meeting in the place and
stead of such absent or disqualified member.
The Executive Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation between the meetings of the Board of Directors, and
any other committee may exercise the power and authority of the Board of
<PAGE>
Directors to the extent specified by the resolution establishing such committee,
or the Certificate of Incorporation or these By-laws; provided, however, that no
committee may take any action that is expressly required by the Delaware Law or
the Certificate of Incorporation or these By-laws to be taken by the Board of
Directors and not by a committee thereof. Each committee shall keep a record of
its acts and proceedings, which shall form a part of the records of the
Corporation in the custody of the Secretary, and all actions of each committee
shall be reported to the Board of Directors at the next meeting of the Board.
Meetings of committees may be called at any time by the Chairman of the
Board, if any, or the chairman of the respective committee. A majority of the
members of the committee shall constitute a quorum for the transaction of
business and, except as expressly limited by this section, the act of a majority
of the members present at any meeting at which there is a quorum shall be the
act of such committee. Except as expressly provided in this section or in the
resolution designating the committee, a majority of the members of any such
committee may select its chairman, fix its rules of procedure, fix the time and
place of its meetings and specify what notice of meetings, if any, shall be
given.
Section 10. Action without Meeting. Unless otherwise specifically
prohibited 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 such committee, as the case may be, execute a consent
thereto in writing setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
such committee.
Section 11. Attendance by Telephone. Members of the Board of Directors,
or any committee thereof, may participate in and act at any meeting of the Board
of Directors, or such committee, as the case may be, through the use of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in such
meeting shall constitute attendance and presence in person at the meeting of the
person or persons so participating.
Section 12. Compensation. By resolution of the Board of Directors,
irrespective of any personal interest of any of the members, the directors may
be paid their reasonable expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid a fixed sum of attendance at meetings or a
stated salary as directors. These payments shall not preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President and a Secretary. The
Board of Directors may also elect a Chairman of the Board, a Vice Chairman, one
or more Vice Presidents, one or more Assistant
<PAGE>
Secretaries, a Treasurer and one or more Assistant Treasurers and such other
officers and agents as it may deem appropriate. Any number of offices may be
held by the same person.
Section 2. Term of Office. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold office
until their successors are elected and qualified, or until their earlier death,
termination, resignation or removal from office. Any officer or agent of the
Corporation may be removed at any time by the Board of Directors, with or
without cause. Any vacancy in any office because of death, resignation,
termination, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3. Chairman of the Board. The Chairman of the Board, when and if
elected, shall be the chief executive officer of the Corporation and, as such,
shall have general supervision, direction and control of the business and
affairs of the Corporation, subject to the control of the Board of Directors,
shall preside at meetings of the Board of Directors and of stockholders and
shall have such other functions, authority and duties as customarily appertain
to the office of the chief executive of a business corporation or as may be
prescribed by the Board of Directors. The Chairman of the Board, if any, shall
be a member of the Board of Directors of the Corporation.
Section 4. Vice Chairman. The Vice Chairman, if any, in the absence of
the Chairman or in the event of the Chairman's inability or refusal to act,
shall have the authority to perform the duties of the Chairman and such other
duties as may from time to time be prescribed by the Board of Directors or the
Chairman of the Board. The Vice Chairman, if any, shall be a member of the Board
of Directors of the Corporation.
Section 5. President. During any period when there shall be an office of
Chairman of the Board, the President shall be the chief operating officer of the
Corporation and shall have such functions, authority and duties as may be
prescribed by the Board of Directors or the Chairman of the Board. During any
period when there shall not be an office of Chairman of the Board, the President
shall be the chief executive officer of the Corporation, and, as such, shall
have the functions, authority and duties provided for the Chairman of the Board
when there is an office of Chairman of the Board.
Section 6. Vice President. Each Vice President shall perform such duties
and have such other powers as may from time to time be prescribed by the Board
of Directors, the Chairman of the Board or the President.
Section 7. Secretary. The Secretary shall: (a) keep a record of all
proceedings of the stockholders, the Board of Directors and any committees
thereof in one of more books provided for that purpose; (b) give, or cause to be
given, all notices that are required by law or these By-laws to be given by the
Secretary; (c) be custodian of the corporate records and, if the Corporation has
a corporate seal, of the seal of the Corporation; (d) have authority to affix
the seal of the Corporation to all instruments the execution of which requires
such seal and to attest such affixing of the seal; (e) keep a register of the
post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (f) sign, with the Chairman or the Vice Chairman,
if any, or President or any Vice
<PAGE>
President, or any other officer thereunto authorized by the Board of Directors,
any certificates for shares of the Corporation, or any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors has authorized to be
executed by the signature of more than one officer; (g) have general charge of
the stock transfer books of the Corporation; (h) have authority to certify as
true and correct, copies of the By-laws, or resolutions of the stockholders, the
Board of Directors and committees thereof, and of other documents of the
Corporation; and (i) in general, perform the duties incident to the office of
secretary and such other duties as from time to time may be prescribed by the
Board of Directors, the Chairman of the Board or the President. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest such affixing of the seal.
Section 8. Assistant Secretary. The Assistant Secretary, or if there
shall be more than one, each Assistant Secretary in the absence of the Secretary
or in the event of the Secretary's inability or refusal to act, shall have the
authority to perform the duties of the Secretary, subject to such limitations
thereon as may be imposed by the Board of Directors, and such other duties as
may from time to time be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Secretary.
Section 9. Treasurer. The Treasurer shall be the principal accounting and
financial officer of the Corporation. The Treasurer shall: (a) have charge of
and be responsible for the maintenance of adequate books of account for the
Corporation; (b) have charge and custody of all funds and securities of the
Corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform the duties incident to the office of treasurer and such
other duties as may from time to time be prescribed by the Board of Directors,
the Chairman of the Board or the President. The Treasurer may sign with the
Chairman or the Vice Chairman, if any, or the President, or any Vice President,
or any other officer thereunto authorized by the Board of Directors,
certificates for shares of the Corporation. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his or
her duties in such sum and with such surety or sureties as the Board of
Directors may determine.
Section 10. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, each Assistant Treasurer, in the absence of the
Treasurer or in the event of the Treasurer's inability or refusal to act, shall
have the authority to perform the duties of the Treasurer, subject to such
limitations thereon as may be imposed by the Board of Directors, and such other
duties as may from time to time be prescribed by the Board of Directors, the
Chairman of the Board, the President or the Treasurer.
Section 11. Other Officers and Agents. Any officer or agent who is
elected or appointed from time to time by the Board of Directors and whose
duties are not specified in these By-laws shall perform such duties and have
such powers as may from time to time be prescribed by the Board of Directors,
the Chairman of the Board or the President.
ARTICLE V
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 1. Form. The shares of the Corporation shall be represented by
certificates; provided, however, the Board of Directors may provide by
resolution or resolutions that some or all of any or all
<PAGE>
classes or series of the Corporation's stock shall be uncertificated shares.
Each certificate for shares shall be consecutively numbered or otherwise
identified. Certificates of stock in the Corporation, shall be signed by or in
the name of the Corporation by the Chairman or Vice Chairman of the Board or the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation. Where a certificate
is countersigned by a transfer agent, other than the Corporation or an employee
of the Corporation, or by a registrar, the signatures of one or more officers of
the Corporation may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued by the
Corporation with the same effect as if such officer, transfer agent or registrar
were such officer, transfer agent or registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by the
Corporation to the person entitled thereto, cancel the old certificate and
record the transaction in its stock transfer books.
Section 3. Replacement. In case of the loss, destruction, mutilation or
theft of a certificate for any stock of the Corporation, a new certificate of
stock or uncertificated shares in place of any certificate theretofore issued by
the Corporation may be issued upon the surrender of the mutilated certificate
or, in the case of loss, destruction or theft of a certificate, upon
satisfactory proof of such loss, destruction or theft and upon such terms as the
Board of Directors may prescribe. The Board of Directors may in its discretion
require the owner of the lost, destroyed or stolen certificate, or his legal
representative, to give the Corporation a bond, in such sum and in such form and
with such surety or sureties as it may direct, to indemnify the Corporation
against any claim that may be made against it with respect to the certificate
alleged to have been lost, destroyed or stolen.
<PAGE>
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, including all appeals (other than an
action, suit or proceeding by or in the right of the Corporation) by reason of
the fact that he or she is or was a director or officer of the Corporation (and
the Corporation, in the discretion of the Board of Directors, may so indemnify a
person by reason of the fact that he or she is or was an employee or agent of
the Corporation or is or was serving at the request of the Corporation in any
other capacity for another corporation, partnership, joint venture, trust or
other enterprise), against expenses (including attorneys' fees), judgments,
decrees, fines, penalties, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith or in a manner which he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding the
foregoing, the Corporation shall be required to indemnify a director or officer
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board of Directors.
Section 2. Actions By or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit, including all
appeals, by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he or she is or was a director or officer of
the Corporation (and the Corporation, in the discretion of the Board of
Directors, may so indemnify a person by reason of the fact that he or she is or
was an employee or agent of the Corporation or is or was serving at the request
of the Corporation in any other capacity for another corporation, partnership,
joint venture, trust or other enterprise), against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been finally adjudged to be liable to the Corporation unless and only to the
extent that the court in which such action or suit was brought, or any other
court of competent jurisdiction, shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper. Notwithstanding the foregoing, the Corporation
shall be required to indemnify a director or officer in connection with an
action, suit or proceeding initiated by such person only if such action, suit or
proceeding was authorized by the Board of Directors.
<PAGE>
Section 3. Indemnity if Successful. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
1 or 2 of this Article, or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Section 4. Standard of Conduct. Except in a situation governed by Section
3 of this Article, any indemnification under Section 1 or 2 of this Article
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Section 1 or 2, as
applicable, of this Article. Such determination shall be made (i) by a majority
vote of directors acting at a meeting at which a quorum consisting of directors
who were not parties to such action, suit or proceeding is present, or (ii) if
such a quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. The determination required by clauses
(i) and (ii) of this Section 4 may in either event be made by written consent of
the majority required by each clause.
Section 5. Expenses. Expenses (including attorneys' fees) of each
director and officer hereunder indemnified actually and reasonably incurred in
defending any civil, criminal, administrative or investigative action, suit or
proceeding or threat thereof shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
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
Corporation as authorized in this Article. Such expenses (including attorneys'
fees) incurred by employees and agents may be so paid upon the receipt of the
aforesaid undertaking and such terms and conditions, if any, as the Board of
Directors deems appropriate.
Section 6. Nonexclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, other Sections of this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may now or hereafter be entitled
under any law, by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.
Section 7. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the Delaware
Law.
Section 8. Definitions. For purposes of this Article, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued,
<PAGE>
would have had the power and authority to indemnify any or all of its directors,
officers, employees and agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation in any other capacity for another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have had with respect to
such constituent corporation if its separate existence had continued.
For purposes of this Article, references to "other capacities" shall
include serving as a trustee or agent for any employee benefit plan; references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries. A person who acted in good faith and in a
manner he or she reasonably believed to be in the best interests of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
Section 9. Continuation. The indemnification and advancement of expenses
provided by, or granted pursuant to, the Delaware Law, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 10. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction, and the remaining provisions hereof
shall be liberally construed to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of such provision in any other jurisdiction.
Section 11. Amendment. The right to indemnification conferred by this
Article shall be deemed to be a contract between the Corporation and each person
referred therein until amended or repealed, but no amendment to or repeal of
these provisions shall apply to or have any effect on the right to
indemnification of any person with respect to any liability or alleged liability
of such person for or with respect to any act or omission of such person
occurring prior to such amendment or repeal.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
from time to time by resolution of the Board of Directors.
<PAGE>
Section 2. Corporation Seal. The corporate seal, if any, of the
Corporation shall be in such form as may be approved from time to time by the
Board of Directors. The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.
Section 3. Notices and Mailing. Except as otherwise provided in the Act,
the Articles of Incorporation or these By-laws, all notices required to be given
by any provision of these By-laws shall be deemed to have been given (i) when
received, if given in person, (ii) on the date of acknowledgment of receipt, if
sent by telex, facsimile or other wire transmission, (iii) one day after
delivery, properly addressed, to a reputable courier for same day or overnight
delivery or (iv) three days after being deposited, properly addressed, in the
U.S. Mail, certified or registered mail, postage prepaid.
Section 4. Waiver of Notice. Whenever any notice is required to be given
under the Delaware Law or the provisions of the Certificate of Incorporation or
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to notice.
Section 5. Interpretation. In these By-laws, unless a clear contrary
intention appears, the singular number includes the plural number and vice
versa, and reference to either gender includes the other gender.
ARTICLE VIII
AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-laws has been conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
<PAGE>
EXECUTION COPY
CN STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of December 18, 1999 (this
"Agreement"), is between CANADIAN NATIONAL RAILWAY COMPANY, a Canadian
corporation ("Issuer"), and BURLINGTON NORTHERN SANTA FE CORPORATION, a Delaware
corporation ("Grantee").
RECITALS
A. The Combination Agreement. Prior to the entry into this Agreement and
prior to the grant of the Option (as defined in Section 1(a)), Issuer, Grantee,
NORTH AMERICAN RAILWAYS, INC., a Delaware corporation owned 50% by Issuer and
50% by Grantee ("Newco"), and Western Merger Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of Newco ("Merger Sub"), have entered into a
Combination Agreement, dated as of the date of this Agreement (the "Combination
Agreement"), pursuant to which Grantee and Issuer have agreed to effect certain
transactions upon the terms and subject to the conditions set forth in the
Combination Agreement.
B. The Stock Option Agreement. As an inducement and condition to
Grantee's willingness to enter into the Combination Agreement, and in
consideration thereof, the board of directors of Issuer has approved the grant
to Grantee of the Option pursuant to this Agreement and the acquisition of
Common Stock (as defined below) by Grantee pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Agreement and in the Combination Agreement, the
parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase, subject to the terms and conditions of this
Agreement, up to 28,895,812 fully paid and nonassessable common shares in the
capital of Issuer ("Common Stock"), of Issuer at a price per share in cash equal
to the average of the closing price of Issuer's Common Stock on the New York
Stock Exchange (as reported in The Wall Street Journal, New York City edition)
on the five trading days ending on the last trading day preceding the Notice
Date (as defined below) (the "Option Price"); provided, however, that in no
event shall the number of shares for which the Option is exercisable exceed
12.5% of the shares of Common Stock issued and outstanding at the time of
exercise (giving effect to the shares of Common Stock issued or issuable under
the Option) (the "Maximum Applicable Percentage"). The number of shares of
Common Stock purchasable upon exercise of the Option are subject to adjustment
as set forth in this Agreement.
<PAGE>
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the aggregate number of shares of Common Stock
purchasable upon exercise of the Option (inclusive of shares, if any, previously
purchased upon exercise of the Option) shall automatically be increased (without
any further action on the part of Issuer or Grantee being necessary) so that,
after such issuance, it equals the Maximum Applicable Percentage. No such
increase shall affect the Option Price.
2. Exercise; Closing. (a) Manner of Exercise; Termination. Grantee or
any other person that shall become a holder of all or part of the Option in
accordance with the terms of this Agreement (each such person being sometimes
referred to in this Agreement as the "Holder") may exercise the Option, in whole
or in part, by delivering a written notice thereof as provided in Section 2(d)
within 18 months following the occurrence of a Triggering Event (as defined in
Section 2(b)) unless prior to such Triggering Event either the Merger Effective
Time or the Arrangement Effective Time (as such terms are defined in the
Combination Agreement) shall have occurred or the Option shall have terminated
in accordance with the following sentence. The Option shall terminate upon any
of (i) the occurrence of either the Merger Effective Time or the Arrangement
Effective Time, (ii) if no notice pursuant to the preceding sentence has been
delivered prior thereto, the close of business on the day 18 months after the
date that Grantee becomes entitled to receive the CN Termination Fee (as defined
in the Combination Agreement) under Section 10.4(c) of the Combination
Agreement, (iii) the performance of the BNSF Stock Option Agreement (as defined
in the Combination Agreement) by Grantee or the right of Issuer to purchase
shares of Grantee's common stock upon exercise of the option granted thereunder
shall have been finally enjoined or held invalid by a court of competent
jurisdiction or (iv) the execution of or the written agreement to enter into an
agreement or series of agreements relating to a Business Combination Transaction
(as defined below) with such Holder; provided, however, that in the event that
any portion of the Option is held by any other person other than the Grantee in
accordance with the terms of this Agreement, any termination pursuant to clause
(iv) above shall only apply to such portion of the Option held by such Holder
and shall not effect that portion of the Option held by the Grantee or such
other persons, as the case may be. A "Business Combination Transaction" shall
mean (i) a consolidation, exchange of shares or merger of a Holder with any
Person and, in the case of a merger, in which the Holder shall not be the
continuing or surviving corporation, (ii) any transaction (including, without
limitation, a consolidation, exchange of shares or merger) in which the Holder
shall be the continuing or surviving corporation but the then outstanding shares
of capital stock of the Holder shall be changed into or exchanged for stock or
other securities of the Holder or any other Person or cash or any other property
or the capital stock of such Holder outstanding immediately before such
transaction shall after such transaction represent less than 50% of the common
shares and common share equivalents of such Holder outstanding immediately after
the transaction or (iii) a sale, lease or other transfer of all or substantially
all the assets of the Holder to any Person.
(b) Triggering Event. A "Triggering Event" shall have occurred if the
Combination Agreement is terminated and Grantee shall have become entitled to
receive the CN Termination Fee pursuant to Section 10.4(c) of the Combination
Agreement.
2
<PAGE>
(c) Notice of Triggering Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If the Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which is referred to in this Agreement as the "Notice Date") specifying
(i) the total number of shares that the Holder will purchase pursuant to such
exercise and (ii) a place and date (a "Closing Date") not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase (a "Closing"); provided, that if the Closing cannot be
effected by reason of the application of any law or regulation, (x) the Holder
or Issuer, as required, promptly after the giving of such notice shall file the
required notice, report, filing or application for approval and shall
expeditiously process the same and (y) the Closing Date shall be extended to not
later than the tenth business day following the expiration or termination of the
restriction imposed by such law. Each of the Holder and the Issuer agrees to
use its reasonable best efforts to cooperate with and provide information to
Issuer or Holder, as the case may be, for the purpose of any required notice,
report, filing or application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Issuer; provided, that failure or
refusal of Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall be exercised in part only, a
new Option evidencing the rights of the Holder to purchase the balance (as
adjusted pursuant to Section 1(b)) of the shares of Common Stock then
purchasable under this Agreement.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and the applicable Canadian securities laws."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the Securities and
Exchange Commission, or a written opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of either the Securities Act of 1933, as amended (the
"Securities Act") or the
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applicable Canadian securities laws. In addition, such certificates shall bear
any other legend as may be required by applicable law.
(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
giving by the Holder to Issuer of a written notice of exercise referred to in
Section 2(d) and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not have been delivered to the
Holder. Issuer shall pay all expenses, and any and all United States and
Canadian federal, provincial, territorial, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
(i) Effect of Statutory or Regulatory Restraints on Exercise. To the
extent that, upon or following the giving by the Holder to Issuer of a written
notice of exercise referred to in Section 2(d), Issuer is prohibited under
applicable law or regulation from delivering to the Holder a certificate or
certificates representing the number of shares of Common Stock purchased by the
Holder, Issuer shall immediately so notify the Holder in writing and thereafter
deliver or cause to be delivered, from time to time, to the Holder the portion
of the Option Shares that Issuer is no longer prohibited from delivering, within
two business days after the date on which it is no longer so prohibited;
provided, however, that upon notification by Issuer in writing of such
prohibition, the Holder may, at any time after receipt of such notification from
Issuer, revoke in writing its exercise notice, whether in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder that portion of the Option Shares that Issuer is not
prohibited from delivering pursuant to the time periods set forth in Section
2(d); and (ii) deliver to the Holder, as appropriate, with respect to the
Option, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of giving the written notice of
exercise referred to in Section 2(d). Notwithstanding anything to the contrary
in this Agreement, the period for exercise of rights related to the Option set
forth in Section 2(a) shall be extended, at the request of Holder, for a period
not to exceed 180 days from the date that the Option would have terminated
pursuant to Section 2(a) hereof or such shorter period necessary to permit the
delivery of all the Option Shares subject to the exercise notice.
(j) Conditions to Exercise. The obligation of the Issuer to effect the
Closing shall be subject to the following conditions:
(a) all regulatory approvals required of the Issuer in connection with
the issuance of the Option Shares hereunder shall have been
obtained, including that the grant of the Option and the issuance
of the Option Shares shall have been approved by The Toronto Stock
Exchange; and
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(b) the issuance of the Option Shares at the Closing shall not be
prohibited by any law, regulation, injunction or order of any
Governmental Entity (as defined in the Combination Agreement).
(k) Waiver of Voting Rights. The Grantee agrees that it shall have no
voting rights, and shall not exercise or permit to be exercised any voting
rights in any circumstance, in respect of the Option or the Common Stock
purchasable under the Option unless, until, and only to the extent that the
Option has been exercised and Common Stock has actually been purchased
thereunder.
3. Covenants of Issuer. In addition to its other agreements and
covenants in this Agreement, Issuer agrees:
(a) Shares Reserved for Issuance. It will maintain, free from
preemptive rights, sufficient authorized but unissued shares of Common
Stock to issue the appropriate number of shares of Common Stock pursuant to
the terms of this Agreement so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from Issuer.
(b) No Avoidance. It will not avoid or seek to avoid (whether by
amendment of its constitutive documents or through reorganization,
consolidation, merger, issuance of rights, dissolution or sale of assets,
or by any other voluntary act) the observance or performance of any of the
covenants, agreements or conditions to be observed or performed under this
Agreement by Issuer.
(c) Further Assurances. After the date of this Agreement, it will
promptly take all actions as may from time to time be required (including
(i) seeking any necessary governmental approval, exemption or other
authorization, (ii) complying with all applicable premerger notification,
reporting and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and (iii) in the event that
prior notice, report, filing or approval with respect to any Governmental
Entity is necessary under any applicable foreign, United States or Canadian
federal, provincial, territorial, state or local law before the Option may
be exercised, cooperating fully with the Holder in preparing and processing
the required applications or notices) in order to permit each Holder to
exercise the Option and purchase shares of Common Stock pursuant to such
exercise and to take all action necessary to protect the rights of the
Holder against dilution.
(d) Stock Exchange Listing. It will use its reasonable best efforts
to cause the shares of Common Stock to be issued pursuant to the Option to
be approved for listing (to the extent they are not already listed) on all
securities exchanges on which shares of Common Stock of the Issuer are then
listed, subject to official notice of issuance.
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4. Representations and Warranties of Issuer. Issuer represents and
warrants to Grantee as follows:
(a) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
necessary corporate action to authorize and reserve, free from preemptive
rights, and permit it to issue, sufficient authorized but unissued shares
of Common Stock so that the Option may be fully exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights of third parties
to purchase shares of Common Stock from Issuer, and all such shares, upon
issuance pursuant to the Option, will be duly authorized, validly issued,
fully paid and nonassessable, and will be delivered free and clear of all
claims, liens, encumbrances, and security interests (other than those
created by this Agreement) and not subject to any preemptive rights.
5. Adjustments. In addition to the adjustment to the total number of
shares of Common Stock purchasable upon exercise of the Option pursuant to
Section 1(b), the total number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the outstanding shares of Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like,
the type and number of shares of Common Stock purchasable upon exercise of
the Option, shall be appropriately adjusted, and proper provision shall be
made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of
shares, other securities, property or cash that such Holder would have
received in respect of the shares of Common Stock purchasable upon exercise
of the Option if the Option had been exercised and such shares of Common
Stock had been issued to such Holder immediately prior to such event or the
record date therefor, as applicable and (ii) in the event any additional
shares of Common Stock are to be issued or otherwise become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock purchasable upon exercise of
the Option shall be increased so that, after such issuance and together
with shares of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), the number of shares so purchasable equals the Maximum
Applicable Percentage of the number of shares of Common Stock issued and
outstanding immediately after the consummation of such change. If any such
change in the outstanding shares of Common Stock occurs at any time on or
after the first trading day included in the calculation of the Option Price
and prior to the Closing, equitable adjustment shall be made to the Option
Price to reflect the effect of such change.
(b) Without limiting the parties' relative rights and obligations
under the Combination Agreement, in the event that Issuer enters into an
agreement or arrangement
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(i) to consolidate with or merge into any person, other than Grantee or one
of its subsidiaries, and Issuer will not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any person,
other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer will be the continuing or surviving corporation, but in connection
with such merger, the shares of Common Stock outstanding immediately prior
to the consummation of such merger will be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any
other property, or the shares of Common Stock outstanding immediately prior
to the consummation of such merger will, after such merger, represent less
than 50% of the outstanding voting securities of the merged company, or
(iii) to sell or otherwise transfer all or substantially all of its assets
to any person, other than Grantee or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction will make proper
provision so that the Option will, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of the
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale or transfer or the record date therefor, as
applicable and make any other necessary adjustments.
6. Registration. (a) Upon the occurrence of a Triggering Event, Issuer
shall, at the request of a Holder, as promptly as practicable prepare, file and
keep current a shelf registration statement under the Securities Act covering
any or all shares issued and issuable pursuant to the Option and shall use its
best efforts to cause such registration statement to become and remain effective
for such period as may be reasonably necessary to permit the sale or other
disposition of any shares of Common Stock issued upon total or partial exercise
of the Option ("Option Shares") in accordance with any plan of disposition
requested by such Holder; provided, however, that Issuer may suspend filing of
or maintaining the effectiveness of a registration statement relating to a
registration request by a Holder under this Section 6 for a period of time (not
in excess of 60 days in the aggregate) if in its judgment such filing of such
registration statement or the maintenance of its effectiveness would require the
disclosure of nonpublic information that Issuer has a good faith business
purpose for preserving as confidential. Subject to the foregoing, Issuer will
use its reasonable best efforts to cause such registration statement to become
effective as soon as practicable. In connection with any such registration,
Issuer and the Holder requesting such registration shall provide each other with
representations, warranties, indemnities and other agreements customarily given
in connection with such registrations. If requested by such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating Issuer in respect of representations, warranties,
indemnities, contribution and other agreements customarily made by issuers in
such underwriting agreements.
(b) In the event that such Holder so requests, the closing of the sale or
other disposition of the Common Stock or other securities pursuant to a
registration statement filed pursuant to Section 6(a) shall occur substantially
simultaneously with the exercise of the Option.
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(c) Any registration statement prepared and filed under this Section 6 and
any sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of the
Holder's counsel related thereto. In connection with any registration pursuant
to this Section 6, Issuer and such Holder will provide each other and any
underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration.
7. Extension of Exercise Periods. The periods for exercise of certain
rights under Section 2 shall be extended in each such case at the request of the
Holder to the extent necessary to avoid liability by the Holder under Section
16(b) of the Securities Exchange Act of 1934, as amended ("Section 16(b)"), by
reason of such exercise.
8. Assignment. Neither party may assign any of its rights or obligations
under this Agreement or the Option to any other person without the express
written consent of the other party. Any attempted assignment in contravention
of the preceding sentence shall be null and void.
9. Filings; Other Actions. The parties hereto will use their reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
10. Specific Performance. The parties acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
11. Severability. The provisions of this Agreement, the Combination
Agreement and any other agreement contemplated by the Combination Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision of this Agreement, the Combination Agreement or any other agreement
contemplated by the Combination Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement or any provisions of
such other agreement. Without limiting the generality of the foregoing, the
invalidity or unenforceability of any provision of any such other agreement
shall not affect the validity or enforceability of any provision of this
Agreement. If any provision of this Agreement or any such other agreement or
the application thereof to any Person or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (ii) the
remainder of this Agreement or any such other agreement and the application of
such provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction. If for any reason a Governmental Entity
determines that the Holder is not permitted to acquire the full number of shares
of Common Stock provided in Section 1(a) of this Agreement (as adjusted pursuant
to Sections 1(b) and 5 of this Agreement), it is the express intention of Issuer
to allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as
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may be permissible, without any amendment or modification of this Agreement or
any other agreement executed or to be executed in connection herewith.
12. Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
when sent, if sent by facsimile, provided that a copy of the facsimile is
promptly sent by U.S. mail and confirmation of receipt has been delivered, (ii)
when delivered, if delivered personally to the intended recipient, and (iii) one
business day later, if sent by overnight delivery via an international courier
service and, in each case at the respective addresses of the parties set forth
in the Combination Agreement.
13. Expenses. Except as otherwise expressly provided in this Agreement or
in the Combination Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
14. Entire Agreement. This Agreement, the Confidentiality Agreement (as
defined in the Combination Agreement) and the Combination Agreement (including
any other exhibits thereto and the ancillary agreements contemplated thereby)
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and permitted assigns. Nothing
in this Agreement is intended to confer upon any person or entity, other than
the parties to this Agreement, and their respective successors and permitted
assigns, any rights or remedies under this Agreement.
15. Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with the laws of the
State of New York without regard to the conflict of law principles thereof. The
parties hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of both the courts of the State of Delaware and of the
United States of America located in Wilmington, Delaware (the "Delaware Courts")
and the Quebec Superior Court located in Montreal, Quebec (the "Quebec Court")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement, waive any objection to the laying
of venue of any such litigation in the Delaware Courts or the Quebec Court and
agree not to plead or claim in any Delaware Court or the Quebec Court that such
litigation brought therein has been brought in an inconvenient forum; provided,
however, that the parties agree that any proceedings in the Quebec Court arising
out of or relating to this Agreement and the transactions contemplated by this
Agreement shall be conducted in English and all written documents relating to
any such proceedings shall be written in English.
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(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 15.
16. U.S. Dollars. All amounts paid or payable hereunder, and all prices
referenced hereunder, shall be in United States Dollars.
17. Captions. The Section and paragraph captions in this Agreement are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions of this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties as of the day and year first written
above.
CANADIAN NATIONAL RAILWAY COMPANY
By:/s/ Paul M. Tellier
----------------------------------------------
Name: Paul M. Tellier
Title: President and Chief Executive Officer
BURLINGTON NORTHERN SANTA FE
CORPORATION
By:/s/ Robert D. Krebs
----------------------------------------------
Name: Robert D. Krebs
Title: Chairman and Chief Executive Officer
<PAGE>
EXECUTION COPY
BNSF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of December 18, 1999 (this
"Agreement"), is between BURLINGTON NORTHERN SANTA FE CORPORATION, a Delaware
corporation ("Issuer"), and CANADIAN NATIONAL RAILWAY COMPANY, a Canadian
corporation ("Grantee").
RECITALS
A. The Combination Agreement. Prior to the entry into this Agreement and
prior to the grant of the Option (as defined in Section 1(a)), Issuer, Grantee,
NORTH AMERICAN RAILWAYS, INC., a Delaware corporation owned 50% by Issuer and
50% by Grantee ("Newco"), and Western Merger Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of Newco ("Merger Sub"), have entered into a
Combination Agreement, dated as of the date of this Agreement (the "Combination
Agreement"), pursuant to which Grantee and Issuer have agreed to effect certain
transactions upon the terms and subject to the conditions set forth in the
Combination Agreement.
B. The Stock Option Agreement. As an inducement and condition to
Grantee's willingness to enter into the Combination Agreement, and in
consideration thereof, the board of directors of Issuer has approved the grant
to Grantee of the Option pursuant to this Agreement and the acquisition of
Common Stock (as defined below) by Grantee pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Agreement and in the Combination Agreement, the
parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase, subject to the terms and conditions of this
Agreement, up to 64,992,261 fully paid and nonassessable shares of common stock,
par value $0.01 per share ("Common Stock"), of Issuer at a price per share in
cash equal to the average of the closing price of Issuer's Common Stock on the
New York Stock Exchange (as reported in The Wall Street Journal, New York City
edition) on the five trading days ending on the last trading day preceding the
Notice Date (as defined below) (the "Option Price"); provided, however, that in
no event shall the number of shares for which the Option is exercisable exceed
12.5% of the shares of Common Stock issued and outstanding at the time of
exercise (giving effect to the shares of Common Stock issued or issuable under
the Option) (the "Maximum Applicable Percentage"). The number of shares of
Common Stock purchasable upon exercise of the Option are subject to adjustment
as set forth in this Agreement.
<PAGE>
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the aggregate number of shares of Common Stock
purchasable upon exercise of the Option (inclusive of shares, if any, previously
purchased upon exercise of the Option) shall automatically be increased (without
any further action on the part of Issuer or Grantee being necessary) so that,
after such issuance, it equals the Maximum Applicable Percentage. No such
increase shall affect the Option Price.
2. Exercise; Closing. (a) Manner of Exercise; Termination. Grantee or
any other person that shall become a holder of all or part of the Option in
accordance with the terms of this Agreement (each such person being sometimes
referred to in this Agreement as the "Holder") may exercise the Option, in whole
or in part, by delivering a written notice thereof as provided in Section 2(d)
within 18 months following the occurrence of a Triggering Event (as defined in
Section 2(b)) unless prior to such Triggering Event either the Merger Effective
Time or the Arrangement Effective Time (as such terms are defined in the
Combination Agreement) shall have occurred or the Option shall have terminated
in accordance with the following sentence. The Option shall terminate upon any
of (i) the occurrence of either the Merger Effective Time or the Arrangement
Effective Time, (ii) if no notice pursuant to the preceding sentence has been
delivered prior thereto, the close of business on the day 18 months after the
date that Grantee becomes entitled to receive the BNSF Termination Fee (as
defined in the Combination Agreement) under Section 10.4(b) of the Combination
Agreement, (iii) the performance of the CN Stock Option Agreement (as defined in
the Combination Agreement) by Grantee or the right of Issuer to purchase shares
of Grantee's common stock upon exercise of the option granted thereunder shall
have been finally enjoined or held invalid by a court of competent jurisdiction
or (iv) the execution of or the written agreement to enter into an agreement or
series of agreements relating to a Business Combination Transaction (as defined
below) with such Holder; provided, however, that in the event that any portion
of the Option is held by any other person other than the Grantee in accordance
with the terms of this Agreement, any termination pursuant to clause (iv) above
shall only apply to such portion of the Option held by such Holder and shall not
effect that portion of the Option held by the Grantee or such other persons, as
the case may be. A "Business Combination Transaction" shall mean (i) a
consolidation, exchange of shares or merger of a Holder with any Person and, in
the case of a merger, in which the Holder shall not be the continuing or
surviving corporation, (ii) any transaction (including, without limitation, a
consolidation, exchange of shares or merger) in which the Holder shall be the
continuing or surviving corporation but the then outstanding shares of capital
stock of the Holder shall be changed into or exchanged for stock or other
securities of the Holder or any other Person or cash or any other property or
the capital stock of such Holder outstanding immediately before such transaction
shall after such transaction represent less than 50% of the common shares and
common share equivalents of such Holder outstanding immediately after the
transaction or (iii) a sale, lease or other transfer of all or substantially all
the assets of the Holder to any Person.
(b) Triggering Event. A "Triggering Event" shall have occurred if the
Combination Agreement is terminated and Grantee shall have become entitled to
receive the BNSF Termination Fee pursuant to Section 10.4(b) of the Combination
Agreement.
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(c) Notice of Triggering Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If the Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which is referred to in this Agreement as the "Notice Date") specifying
(i) the total number of shares that the Holder will purchase pursuant to such
exercise and (ii) a place and date (a "Closing Date") not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase (a "Closing"); provided, that if the Closing cannot be
effected by reason of the application of any law or regulation, (x) the Holder
or Issuer, as required, promptly after the giving of such notice shall file the
required notice, report, filing or application for approval and shall
expeditiously process the same and (y) the Closing Date shall be extended to not
later than the tenth business day following the expiration or termination of the
restriction imposed by such law. Each of the Holder and the Issuer agrees to
use its reasonable best efforts to cooperate with and provide information to
Issuer or Holder, as the case may be, for the purpose of any required notice,
report, filing or application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Issuer; provided, that failure or
refusal of Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall be exercised in part only, a
new Option evidencing the rights of the Holder to purchase the balance (as
adjusted pursuant to Section 1(b)) of the shares of Common Stock then
purchasable under this Agreement.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the Securities and
Exchange Commission, or a written opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the Securities Act of 1933, as amended (the "Securities
Act"). In addition, such certificates shall bear any other legend as may be
required by applicable law.
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(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
giving by the Holder to Issuer of a written notice of exercise referred to in
Section 2(d) and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not have been delivered to the
Holder. Issuer shall pay all expenses, and any and all United States and
Canadian federal, provincial, territorial, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
(i) Effect of Statutory or Regulatory Restraints on Exercise. To the
extent that, upon or following the giving by the Holder to Issuer of a written
notice of exercise referred to in Section 2(d), Issuer is prohibited under
applicable law or regulation from delivering to the Holder a certificate or
certificates representing the number of shares of Common Stock purchased by the
Holder, Issuer shall immediately so notify the Holder in writing and thereafter
deliver or cause to be delivered, from time to time, to the Holder the portion
of the Option Shares that Issuer is no longer prohibited from delivering, within
two business days after the date on which it is no longer so prohibited;
provided, however, that upon notification by Issuer in writing of such
prohibition, the Holder may, at any time after receipt of such notification from
Issuer, revoke in writing its exercise notice, whether in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder that portion of the Option Shares that Issuer is not
prohibited from delivering pursuant to the time periods set forth in Section
2(d); and (ii) deliver to the Holder, as appropriate, with respect to the
Option, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of giving the written notice of
exercise referred to in Section 2(d). Notwithstanding anything to the contrary
in this Agreement, the period for exercise of rights related to the Option set
forth in Section 2(a) shall be extended, at the request of Holder, for a period
not to exceed 180 days from the date that the Option would have terminated
pursuant to Section 2(a) hereof or such shorter period necessary to permit the
delivery of all the Option Shares subject to the exercise notice.
(j) Conditions to Exercise. The obligation of the Issuer to effect the
Closing shall be subject to the condition that the issuance of the Option Shares
at the Closing shall not be prohibited by any law, regulation, injunction or
order of any Governmental Entity (as defined in the Combination Agreement).
(k) Waiver of Voting Rights. The Grantee agrees that it shall have no
voting rights, and shall not exercise or permit to be exercised any voting
rights in any circumstance, in respect of the Option or the Common Stock
purchasable under the Option unless, until, and only to the extent that the
Option has been exercised and Common Stock has been actually purchased
thereunder.
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3. Covenants of Issuer. In addition to its other agreements and
covenants in this Agreement, Issuer agrees:
(a) Shares Reserved for Issuance. It will maintain, free from
preemptive rights, sufficient authorized but unissued shares of Common
Stock to issue the appropriate number of shares of Common Stock pursuant to
the terms of this Agreement so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from Issuer.
(b) No Avoidance. It will not avoid or seek to avoid (whether by
amendment of its constitutive documents or through reorganization,
consolidation, merger, issuance of rights, dissolution or sale of assets,
or by any other voluntary act) the observance or performance of any of the
covenants, agreements or conditions to be observed or performed under this
Agreement by Issuer.
(c) Further Assurances. After the date of this Agreement, it will
promptly take all actions as may from time to time be required (including
(i) seeking any necessary governmental approval, exemption or other
authorization, (ii) complying with all applicable premerger notification,
reporting and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and (iii) in the event that
prior notice, report, filing or approval with respect to any Governmental
Entity is necessary under any applicable foreign, United States or Canadian
federal, provincial, territorial, state or local law before the Option may
be exercised, cooperating fully with the Holder in preparing and processing
the required applications or notices) in order to permit each Holder to
exercise the Option and purchase shares of Common Stock pursuant to such
exercise and to take all action necessary to protect the rights of the
Holder against dilution.
(d) Stock Exchange Listing. It will use its reasonable best efforts
to cause the shares of Common Stock to be issued pursuant to the Option to
be approved for listing (to the extent they are not already listed) on all
securities exchanges on which shares of Common Stock of the Issuer are then
listed, subject to official notice of issuance.
4. Representations and Warranties of Issuer. Issuer represents and
warrants to Grantee as follows:
(a) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
necessary corporate action to authorize and reserve, free from preemptive
rights, and permit it to issue, sufficient authorized but unissued shares
of Common Stock so that the Option may be fully exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights of third parties
to purchase shares of Common Stock from Issuer, and all such shares, upon
issuance pursuant to the Option, will be duly authorized, validly issued,
fully paid and
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nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances, and security interests (other than those created by this
Agreement) and not subject to any preemptive rights.
5. Adjustments. In addition to the adjustment to the total number of
shares of Common Stock purchasable upon exercise of the Option pursuant to
Section 1(b), the total number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the outstanding shares of Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like,
the type and number of shares of Common Stock purchasable upon exercise of
the Option, shall be appropriately adjusted, and proper provision shall be
made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of
shares, other securities, property or cash that such Holder would have
received in respect of the shares of Common Stock purchasable upon exercise
of the Option if the Option had been exercised and such shares of Common
Stock had been issued to such Holder immediately prior to such event or the
record date therefor, as applicable and (ii) in the event any additional
shares of Common Stock are to be issued or otherwise become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock purchasable upon exercise of
the Option shall be increased so that, after such issuance and together
with shares of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), the number of shares so purchasable equals the Maximum
Applicable Percentage of the number of shares of Common Stock issued and
outstanding immediately after the consummation of such change. If any such
change in the outstanding shares of Common Stock occurs at any time on or
after the first trading day included in the calculation of the Option Price
and prior to the Closing, equitable adjustment shall be made to the Option
Price to reflect the effect of such changes.
(b) Without limiting the parties' relative rights and obligations
under the Combination Agreement, in the event that Issuer enters into an
agreement or arrangement (i) to consolidate with or merge into any person,
other than Grantee or one of its subsidiaries, and Issuer will not be the
continuing or surviving corporation in such consolidation or merger, (ii)
to permit any person, other than Grantee or one of its subsidiaries, to
merge into Issuer and Issuer will be the continuing or surviving
corporation, but in connection with such merger, the shares of Common Stock
outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of Issuer or any
other person or cash or any other property, or the shares of Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
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all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of the Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale or transfer or the record date
therefor, as applicable and make any other necessary adjustments.
6. Registration. (a) Upon the occurrence of a Triggering Event, Issuer
shall, at the request of a Holder, as promptly as practicable prepare, file and
keep current a shelf registration statement under the Securities Act covering
any or all shares issued and issuable pursuant to the Option and shall use its
best efforts to cause such registration statement to become and remain effective
for such period as may be reasonably necessary to permit the sale or other
disposition of any shares of Common Stock issued upon total or partial exercise
of the Option ("Option Shares") in accordance with any plan of disposition
requested by such Holder; provided, however, that Issuer may suspend filing of
or maintaining the effectiveness of a registration statement relating to a
registration request by a Holder under this Section 6 for a period of time (not
in excess of 60 days in the aggregate) if in its judgment such filing of such
registration statement or the maintenance of its effectiveness would require the
disclosure of nonpublic information that Issuer has a good faith business
purpose for preserving as confidential. Subject to the foregoing, Issuer will
use its reasonable best efforts to cause such registration statement to become
effective as soon as practicable. In connection with any such registration,
Issuer and the Holder requesting such registration shall provide each other with
representations, warranties, indemnities and other agreements customarily given
in connection with such registrations. If requested by such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating Issuer in respect of representations, warranties,
indemnities, contribution and other agreements customarily made by issuers in
such underwriting agreements.
(b) In the event that such Holder so requests, the closing of the sale or
other disposition of the Common Stock or other securities pursuant to a
registration statement filed pursuant to Section 6(a) shall occur substantially
simultaneously with the exercise of the Option.
(c) Any registration statement prepared and filed under this Section 6 and
any sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of the
Holder's counsel related thereto. In connection with any registration pursuant
to this Section 6, Issuer and such Holder will provide each other and any
underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration.
7. Extension of Exercise Periods. The periods for exercise of certain
rights under Section 2 shall be extended in each such case at the request of the
Holder to the extent necessary
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to avoid liability by the Holder under Section 16(b) of the Securities Exchange
Act of 1934, as amended ("Section 16(b)"), by reason of such exercise.
8. Assignment. Neither party may assign any of its rights or obligations
under this Agreement or the Option to any other person without the express
written consent of the other party. Any attempted assignment in contravention
of the preceding sentence shall be null and void.
9. Filings; Other Actions. The parties hereto will use their reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
10. Specific Performance. The parties acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
11. Severability. The provisions of this Agreement, the Combination
Agreement and any other agreement contemplated by the Combination Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision of this Agreement, the Combination Agreement or any other agreement
contemplated by the Combination Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement or any provisions of
such other agreement. Without limiting the generality of the foregoing, the
invalidity or unenforceability of any provision of any such other agreement
shall not affect the validity or enforceability of any provision of this
Agreement. If any provision of this Agreement or any such other agreement or
the application thereof to any Person or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (ii) the
remainder of this Agreement or any such other agreement and the application of
such provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction. If for any reason a Governmental Entity
determines that the Holder is not permitted to acquire the full number of shares
of Common Stock provided in Section 1(a) of this Agreement (as adjusted pursuant
to Sections 1(b) and 5 of this Agreement), it is the express intention of Issuer
to allow the Holder to acquire or to require Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification of
this Agreement or any other agreement executed or to be executed in connection
herewith.
12. Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
when sent, if sent by facsimile, provided that a copy of the facsimile is
promptly sent by U.S. mail and confirmation of receipt has been delivered (ii)
when delivered, if delivered personally to the intended recipient, and (iii) one
business day later, if sent by overnight delivery via an international courier
service and, in each case at the respective addresses of the parties set forth
in the Combination Agreement.
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13. Expenses. Except as otherwise expressly provided in this Agreement or
in the Combination Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
14. Entire Agreement. This Agreement, the Confidentiality Agreement (as
defined in the Combination Agreement) and the Combination Agreement (including
any other exhibits thereto and the ancillary agreements contemplated thereby)
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and permitted assigns. Nothing
in this Agreement is intended to confer upon any person or entity, other than
the parties to this Agreement, and their respective successors and permitted
assigns, any rights or remedies under this Agreement.
15. Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with the laws of the
State of New York without regard to the conflict of law principles thereof. The
parties hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of both the courts of the State of Delaware and of the
United States of America located in Wilmington, Delaware (the "Delaware Courts")
and the Quebec Superior Court located in Montreal, Quebec (the "Quebec Court")
for any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement, waive any objection to the laying
of venue of any such litigation in the Delaware Courts or the Quebec Court and
agree not to plead or claim in any Delaware Court or the Quebec Court that such
litigation brought therein has been brought in an inconvenient forum; provided,
however, that the parties agree that any proceedings in the Quebec Court arising
out of or relating to this Agreement and the transactions contemplated by this
Agreement shall be conducted in English and all written documents relating to
any such proceedings shall be written in English.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
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UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 15.
16. U.S. Dollars. All amounts paid or payable hereunder, and all prices
referenced hereunder, shall be in United States Dollars.
17. Effectiveness. This Agreement shall not be effective until, but shall
become effective automatically immediately, without any action on the part of
Issuer, Grantee or any Holder, when, the Reciprocating Event (as defined below)
occurs. The "Reciprocating Event" shall mean the approval by The Toronto Stock
Exchange of both (i) the grant of the option granted to Issuer by Grantee under
the CN Stock Option Agreement and (ii) the issuance of the shares of Grantee's
common stock issuable thereunder.
18. Captions. The Section and paragraph captions in this Agreement are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions of this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties as of the day and year first written
above.
CANADIAN NATIONAL RAILWAY COMPANY
By:/s/ Paul M. Tellier
----------------------------------------------
Name: Paul M. Tellier
Title: President and Chief Executive Officer
BURLINGTON NORTHERN SANTA FE
CORPORATION
By:/s/ Robert D. Krebs
----------------------------------------------
Name: Robert D. Krebs
Title: Chairman and Chief Executive Officer
