SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
Transaction Statement under Section 13(e) of
the Securities Exchange Act of 1934 and Rule 13e-3 Thereunder
(Amendment No. 2)
MOTOR CARGO INDUSTRIES, INC.
(Name of Issuer)
UNION PACIFIC CORPORATION
MOTOR MERGER CO.
MOTOR CARGO INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
Common Stock, No Par Value
(Title of Class of Securities)
619907108
(CUSIP Number of Class of Securities)
Carl W. von Bernuth, Esq.
Senior Vice President, General Counsel and Secretary
James J. Theisen, Jr., Esq.
Senior Corporate Counsel and Assistant Secretary
Union Pacific Corporation
1416 Dodge Street
Omaha, Nebraska 68179
Telephone: (402) 271-5777
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Person(s) Filing Statement)
with copies to:
Paul T. Schnell, Esq.
Richard J. Grossman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telephone: (212) 735-3000
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [_] The filing of a registration statement under the Securities Act of
1933.
c. [_] A tender offer.
d. [_] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. [_]
Check the following box if this is a final amendment reporting the results
of the transaction. [_]
TRANSACTION STATEMENT
ON SCHEDULE 13E-3
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction, passed upon the
merits or the fairness of the transaction or passed upon the adequacy or
accuracy of the information contained in this document. Any representation to
the contrary is a criminal offense.
January 16, 2002
SUMMARY TERM SHEET
This summary and the remainder of this Transaction Statement on Schedule
13E-3 include information describing the "going private" merger involving Motor
Cargo Industries, Inc., how it affects you, what your rights are with respect
to the merger as a shareholder of Motor Cargo and the position of Motor Cargo,
Motor Merger Co. and Union Pacific Corporation on the fairness of the merger to
the unaffiliated shareholders of Motor Cargo (that is, the shareholders other
than Union Pacific and its affiliates). Additional important information is
contained in the Annexes to this Statement and you are urged to read the
Annexes together with this Statement.
Purpose of the Merger (page 6).
. Union Pacific, a Utah corporation, owns approximately 99.7% of the
outstanding shares of Motor Cargo common stock, which it acquired on
November 30, 2001 following acceptance of the shares of Motor Cargo
common stock pursuant to Union Pacific's offer to exchange all
outstanding shares of Motor Cargo common stock. The merger described in
this Statement is pursuant to an Agreement and Plan of Merger, dated as
of October 15, 2001, by and among Motor Cargo, Union Pacific and Motor
Merger Co. Union Pacific now intends to cause Motor Merger Co., a Utah
corporation and a wholly-owned subsidiary of Union Pacific, to merge
with Motor Cargo as a means of acquiring those shares of Motor Cargo
common stock not acquired in the offer.
Principal Terms of the Merger.
. The Merger (page 20). Union Pacific owns 6,801,327 shares of Motor Cargo
common stock, or approximately 99.7% of the outstanding common stock of
Motor Cargo. Union Pacific intends to contribute those shares to Motor
Merger Co. and to cause Motor Cargo to merge into Motor Merger Co. on or
about February [ . ], 2002 (or as soon thereafter as possible) pursuant
to a "short-form" merger. As a result of the "short-form" merger, each
share of Motor Cargo common stock not owned by Union Pacific will be
converted into the right to receive $12.10 in cash. Shareholders of
Motor Cargo will not be entitled or required to vote their shares with
respect to the merger. As a result, none of Union Pacific, Motor Cargo
or Motor Merger Co. is soliciting proxies or consents from Motor Cargo
shareholders in connection with the merger.
. Merger Consideration (page 21). The consideration in the merger will be
$12.10 per share in cash.
. Motor Cargo Shares Outstanding (page 18). As of January 15, 2002, a
total of 6,823,540 shares of Motor Cargo common stock were outstanding.
. Payment for Shares (page 21). Union Pacific will pay you for your shares
of Motor Cargo common stock promptly after the effective time of the
merger. Instructions for surrendering your stock certificates will be
set forth in a Notice of Merger and Dissenters' Rights and a Letter of
Transmittal, which will be mailed to shareholders of record of Motor
Cargo within 10 calendar days following the date the merger becomes
effective and should be read carefully. Please do not submit your stock
certificates before you have received these documents. Sending us your
stock certificates with a properly signed Letter of Transmittal will
waive your dissenter's rights described below. See Item 4, "Terms of the
Transaction," in this Statement.
. Source and Amount of Funds (page 25). Union Pacific estimates that the
total amount of funds required to purchase all of the shares of Motor
Cargo common stock pursuant to the merger and to pay related fees and
expenses will be approximately $397,000. We expect to obtain the
necessary funds from available cash and working capital.
1
Union Pacific's and Motor Merger Co.'s Position on the Fairness of the Merger
(page 8).
Union Pacific and Motor Merger Co. have concluded that the merger is both
substantively and procedurally fair to the unaffiliated shareholders of Motor
Cargo, based primarily on the following factors:
. The offer and the merger were approved by the Board of Directors of
Motor Cargo following arms-length negotiations between Union Pacific and
Motor Cargo.
. The Board of Directors of Motor Cargo has determined that the merger is
advisable and fair to, and in the best interests of, the shareholders of
Motor Cargo.
. Harold R. Tate, previously Motor Cargo's majority shareholder, was in
favor of the offer and the merger.
. Motor Cargo has received an opinion from Morgan Keegan & Company, Inc.
dated October 15, 2001 to the effect that, as of such date and based
upon the assumptions, limitations and qualifications in the opinion, the
consideration to be received by shareholders of Motor Cargo pursuant to
the offer and the merger is fair to those shareholders from a financial
point of view.
. Since the date of the merger agreement, no party made Motor Cargo a
"superior proposal" which would have allowed the Motor Cargo Board to
make a "subsequent determination." The merger agreement could have been
terminated by Motor Cargo if Motor Cargo made a subsequent determination
in compliance with the merger agreement, provided Motor Cargo paid Union
Pacific a termination fee.
. The concurrence of a majority of the directors of Motor Cargo in office
prior to the existence of an affiliate relationship between Motor Cargo
and either Union Pacific or Motor Merger Co. is required to:
. amend or terminate the merger agreement;
. extend or waive the time for the performance of any of the
obligations or other acts of Union Pacific or Motor Merger Co. under
the merger agreement; or
. waive any of Motor Cargo's rights under the merger agreement.
. The merger represents an opportunity for the unaffiliated shareholders
of Motor Cargo to realize cash for their shares, which could otherwise
be difficult or impossible given the illiquidity of the market for
shares of Motor Cargo common stock following the offer.
. The merger will provide consideration to Motor Cargo's unaffiliated
shareholders entirely in cash and is not subject to any financing
condition.
. The unaffiliated shareholders of Motor Cargo are entitled to exercise
dissenters' rights and demand payment of the "fair value" for their
shares.
. The Merger Agreement provided all shareholders of Motor Cargo with an
opportunity to elect to receive either $12.10 in cash or 0.26 of a share
of Union Pacific common stock in the Offer and more than 99% of the
Shares were tendered in the Offer.
See "Special Factors--Fairness of the Merger--Factors Considered in
Determining Fairness" in this Statement.
Motor Cargo's Position as to the Fairness of the Merger (page 12).
Motor Cargo has concluded that the merger is both substantively and
procedurally fair to the unaffiliated shareholders of Motor Cargo, based
primarily on the factors set forth in Item 4, "The Solicitation or
Recommendation" of the Schedule 14D-9, which is attached to this Statement as
Annex B and is incorporated herein by reference.
Potential Conflicts of Interest. Now that the offer is complete, Union
Pacific controls Motor Cargo because it owns approximately 99.7% of Motor
Cargo's common stock and has five representatives on the seven-member Board of
Directors of Motor Cargo. Accordingly, there are various actual or potential
conflicts of interest in connection with the merger.
2
Consequences of the Merger (pages 5 and 6).
Completion of the merger will have the following consequences:
. Motor Cargo will be a privately held corporation, with Union Pacific
owning 100% of the equity interest in Motor Cargo's business.
. Only Union Pacific will have the opportunity to participate in the
future earnings and growth, if any, of Motor Cargo. Similarly, only
Union Pacific will face the risk of losses generated by Motor Cargo's
operations or any decrease in the value of Motor Cargo after the merger.
. The shares of Motor Cargo common stock will no longer be publicly
traded. In addition, Motor Cargo will no longer be subject to the
reporting and other disclosure requirements of the Securities Exchange
Act of 1934, including requirements to file annual and other periodic
reports or to provide the type of going-private disclosure contained in
this Statement.
. Subject to the exercise of statutory dissenters' rights, each of your
shares will be converted into the right to receive $12.10 in cash,
without interest.
Dissenters' Rights (page 21).
. You have a statutory right to dissent from the merger and demand payment
of the fair value of your Motor Cargo shares, plus interest, if any,
from the date of the merger at a statutory rate of interest, which is
currently 10% per annum. For purposes of your dissenters rights under
the Utah Revised Business Corporation Act, the "fair value" of your
Motor Cargo shares means the value of the shares immediately before the
effectuation of the merger, excluding any appreciation or depreciation
in anticipation of the merger.
. Within ten days after the date on which the merger is consummated, each
shareholder will receive a Notice of Merger and Dissenters' Rights. This
Notice will state the effective date of the merger and provide an
address to which you must send a payment demand if you wish to exercise
your dissenters' rights. The Notice will also indicate where and when
certificates for your Motor Cargo shares must be deposited and the date
by which your payment demand must be received (which date must not be
fewer than 30 days nor more than 70 days after the date on which the
Notice of Merger and Dissenters' Rights is delivered). The Notice of
Merger and Dissenters' Rights will include a form for demanding payment
and a copy of the sections of the Utah Revised Business Corporation Act
pertaining to dissenters' rights.
. If you exercise your dissenters' rights and you believe the amount paid
to you by the corporation surviving the merger is less than the fair
value of your Motor Cargo shares, or if the corporation surviving the
merger does not pay you following receipt of your demand for payment,
you must notify the corporation surviving the merger, in writing, within
30 days of your estimate of the fair value of your Motor Cargo shares
and demand payment of the estimated amount. If your demand remains
unsettled within 60 days after it is received, the corporation surviving
the merger will commence a judicial proceeding and petition the court to
determine the fair value of your Motor Cargo shares and the amount of
interest.
. Your statutory right to dissent is set forth in Part 13 of the Utah
Revised Business Corporation Act. Any failure to comply with its terms
will result in an irrevocable loss of such right. If you wish to
exercise your right of dissent, you are encouraged to seek advice from
legal counsel.
See Item 4(d), "Terms of the Transaction--Dissenters' Rights," and Annex
D to this Statement.
3
For More Information (pages 18 and 19).
. More information regarding Union Pacific and Motor Cargo is available
from their public filings with the Securities and Exchange Commission.
See Item 2, "Subject Company Information," and Item 3, "Identity and
Background of Filing Persons," in this Statement.
. If you have any questions about the merger, please contact our
information agent, Morrow & Co., Inc., collect at (212) 754-8000 or
toll-free at (800) 654-2468 if you represent a bank or brokerage firm,
or (800) 607-0888 if you are a shareholder.
4
INTRODUCTION
This Transaction Statement on Schedule 13E-3 (the "Statement") is being
filed by Union Pacific Corporation, a Utah corporation ("Union Pacific"), Motor
Merger Co., a Utah corporation and a wholly-owned subsidiary of Union Pacific
("Merger Subsidiary"), and Motor Cargo Industries, Inc., a Utah corporation
("Motor Cargo"), pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 13e-3 thereunder. This
Statement is being filed in connection with a short-form merger (the "Merger")
of Motor Cargo with and into Merger Subsidiary, pursuant to Section 16-10a-1104
of the Utah Revised Business Corporation Act (the "URBCA"). The effective time
(the "Effective Time") of the Merger is expected to be on or about February
[.], 2002 or as soon thereafter as possible.
As of January 15, 2002, there were issued and outstanding 6,823,540 shares
of common stock, no par value (the "Shares"), of Motor Cargo. Union Pacific
owns 6,801,327 Shares, which it acquired on November 30, 2001 following Union
Pacific's offer to exchange all of Motor Cargo's outstanding common stock for
(a) 0.26 of a share of Union Pacific common stock or (b) $12.10 in cash for
each of the Shares (the "Offer"). The Offer was effected pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of October
15, 2001, by and among Motor Cargo, Union Pacific and Merger Subsidiary. Union
Pacific intends to contribute such Shares to Merger Subsidiary immediately
before the Effective Time. At the Effective Time, Union Pacific intends to
acquire through the Merger the Shares that Union Pacific does not then own.
Upon the consummation of the Merger, each outstanding Share will be
cancelled and each outstanding Share not held by Union Pacific, Merger
Subsidiary or a shareholder of Motor Cargo who properly exercises statutory
dissenters' rights under the URBCA will be automatically converted into the
right to receive $12.10 per Share in cash (the "Merger Consideration"), without
interest, upon surrender of the certificate for such Share to Wells Fargo Bank
Minnesota, N.A. (the "Paying Agent"). Instructions with regard to the surrender
of stock certificates, together with a description of statutory dissenters'
rights, will be set forth in a Notice of Merger and Dissenters' Rights and a
Letter of Transmittal, which documents will be mailed to shareholders of record
of Motor Cargo promptly after the Effective Time and should be read carefully.
Under the URBCA, no further action is required by the Motor Cargo Board of
Directors or the shareholders of Motor Cargo, other than Union Pacific and
Merger Subsidiary, for the Merger to become effective. Merger Subsidiary will
be the surviving corporation in the Merger. As a result of the Merger, Union
Pacific will be the only shareholder of Merger Subsidiary and will own 100% of
the business of Motor Cargo.
Please note that many of the items in this Statement incorporate by
reference other documents that contain more detailed information than is
provided in this Statement. These documents include the Prospectus relating to
the Offer, which is attached to this Statement as Annex A and incorporated
herein by reference, and Motor Cargo's Solicitation/Recommendation Statement on
Schedule 14D-9, as amended (the "Schedule 14D-9"), which is attached to this
Statement as Annex B and incorporated herein by reference. The Prospectus and
the Schedule 14D-9 contain important additional information about Union
Pacific, Motor Cargo and Merger Subsidiary, including financial information
about Union Pacific and Motor Cargo, the background of the transactions
preceding the Merger and the effect of those transactions on Union Pacific,
Motor Cargo and Merger Subsidiary.
The description of the Merger and the Merger Agreement contained in this
Statement and in the Prospectus describes the material terms of the Merger
Agreement but does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement which is attached hereto as Annex C and
incorporated herein by reference.
This Statement is intended to be read along with the attached Annexes and
the documents incorporated into this Statement by reference, and it is not
intended to replace the important information included in such Annexes and
documents.
5
This Statement and the documents incorporated by reference in this Statement
include certain forward-looking statements. These statements appear throughout
this Statement and include statements regarding the intent, belief or current
expectations of Union Pacific, including statements concerning Union Pacific's
strategies following completion of the Merger. Such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties.
Actual results may differ materially from those described in such
forward-looking statements as a result of various factors.
SPECIAL FACTORS
PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER
Purposes
Union Pacific owns approximately 99.7% of the outstanding Shares. Union
Pacific acquired its Shares pursuant to the Offer. The purpose of the Merger is
to enable Union Pacific to acquire all of the remaining outstanding equity
interest in Motor Cargo and to provide the remaining public shareholders of
Motor Cargo other than Union Pacific and Merger Subsidiary (the "Public
Shareholders") $12.10 per Share in cash. The Merger was structured as a
"short-form" merger in order to provide the shareholders of Motor Cargo who did
not tender their Shares in the Offer the opportunity to receive $12.10 per
Share in cash at the earliest possible time.
Following completion of the Merger, Motor Cargo will be operated separately
from Overnite Transportation Company, a Virginia corporation and an indirect,
wholly owned subsidiary of Union Pacific, and will maintain its own corporate
identity. There are no plans to merge any of the operating facilities or
operating employees of Overnite and Motor Cargo, but over time, there may be
some efficiencies realized from combining some administrative functions into a
parent company.
Union Pacific and Overnite plan to grow a partnership between Overnite and
Motor Cargo whereby Overnite and Motor Cargo will offer through billing and
through tracing to customers that Overnite does not serve directly in the
Western United States and customers that Motor Cargo does not serve in the
other parts of the United States. Union Pacific expects that the partnership
between Overnite and Motor Cargo will lead to growth for both companies.
Alternatives
Union Pacific believes that effecting the transaction by way of a short-form
merger with Merger Subsidiary under Section 16-10a-1104 of the URBCA is the
quickest and most cost-effective way for Union Pacific to acquire the
outstanding public minority equity interest in Motor Cargo following the
completion of the Offer and to provide the $12.10 per Share in cash as required
by the Merger Agreement to the Public Shareholders.
Reasons
Union Pacific has determined to effect the Merger at this time (i.e., as
promptly as practicable after completion of the Offer) because it wishes to
immediately complete the acquisition of Motor Cargo. The Merger is structured
as a short-form merger under Section 16-10a-1104 of the URBCA. This form of
merger allows the Public Shareholders to receive cash for their Shares quickly
and allows the business of Motor Cargo to become wholly-owned by Union Pacific
without any further action by the Public Shareholders.
Effects
General. As a result of the Offer, Union Pacific has control over the
conduct of Motor Cargo's business and, upon completion of the Merger, Union
Pacific will have a 100% interest in the net assets, the net book value and the
net earnings of Motor Cargo. In addition, Union Pacific will receive the
benefit of the right to participate in any future increases in the value of
Motor Cargo and will bear the risk of any losses incurred in the operation of
Motor Cargo and any decrease in the value of Motor Cargo.
6
As a result of the Merger, Union Pacific's interest in the net book value
and net earnings of Motor Cargo will increase from approximately 99.7% to 100%
which represents an increase of approximately $186,000 in net book value as of
September 30, 2001 and $13,800 in net earnings for the nine month period ended
September 30, 2001. As a result of the Merger, Merger Subsidiary's interest in
the net book value and net earnings of Motor Cargo will increase from 0% to
100% which represents an increase of approximately $62 million in net book
value as of September 30, 2001 and $4.6 million in net earnings for the nine
month period ended September 30, 2001. Union Pacific estimates that
approximately $115,000 will be saved on an annual basis as a result of the
termination of Motor Cargo's Exchange Act reporting obligations.
Shareholders. Upon completion of the Merger, the Public Shareholders will
no longer have any interest in, and will not be shareholders of, Motor Cargo.
All incidents of stock ownership of the Public Shareholders, such as the right
to vote on certain corporate decisions, to elect directors, to receive
distributions upon the liquidation of Motor Cargo and to exercise dissenters'
rights upon certain mergers or consolidations of Motor Cargo (other than
dissenters' rights in connection with the Merger), as well as the benefit of
potential increases in the value of a Public Shareholder's holdings in Motor
Cargo based on any improvements in Motor Cargo's future performance, will be
extinguished upon completion of the Merger. The Public Shareholders also will
not bear the risks of potential decreases in the value of their holdings in
Motor Cargo or decreases in the value of Motor Cargo after the Merger. Instead,
the Public Shareholders will have liquidity, in the form of the Merger
Consideration, in place of an ongoing equity interest in Motor Cargo, in the
form of the Shares. In summary, if the Merger is completed, the Public
Shareholders will have no ongoing rights as shareholders of Motor Cargo (other
than statutory dissenters' rights in the case of Public Shareholders who are
entitled to and perfect such rights under Utah law).
The Shares. Once the Merger is consummated, public trading of the Shares
will cease and Motor Cargo will no longer be listed on the Nasdaq National
Market. Union Pacific intends to deregister the Shares under the Exchange Act.
As a result, Motor Cargo will no longer be required to file annual, quarterly
and other periodic reports with the Securities and Exchange Commission (the
"Commission") under Section 13(a) of the Exchange Act and will no longer be
subject to the proxy rules under Section 14 of the Exchange Act. In addition,
the principal shareholder of Motor Cargo will no longer be subject to reporting
its ownership of Shares under Section 13 of the Exchange Act or to the
requirement under Section 16 of the Exchange Act to disgorge to Motor Cargo
certain "short swing" profits from the purchase and sale of Shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general summary of the material United States federal
income tax consequences of the Merger applicable to a person that exchanges
Shares for cash pursuant to the Merger. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
judicial authorities, published positions of the Internal Revenue Service (the
"IRS") and other applicable authorities, all as in effect on the date of this
document and all of which are subject to change or differing interpretations
(possibly with retroactive effect). This discussion is limited to United States
persons that hold their Shares as capital assets for United States federal
income tax purposes and does not address the tax treatment to shareholders who
hold their Shares through a partnership or other pass-through entity. This
discussion does not address all aspects of United States federal income
taxation that may be relevant to Motor Cargo shareholders in light of their
particular circumstances or to Motor Cargo shareholders subject to special
treatment under United States federal income tax law or to Motor Cargo
shareholders who hold multiple blocks of Shares that were acquired at different
prices or at different times. Furthermore, this summary does not address any
aspect of state, local or foreign taxation. No assurance can be given that the
IRS would not assert, or that a court would not sustain, a position contrary to
any of the tax aspects set forth below. Holders of Shares are encouraged to
consult their own tax advisors as to the United States federal income tax
consequences of the Merger, as well as the effects of state, local and foreign
tax laws.
7
A holder of Shares that exchanges some or all of its Shares for cash
pursuant to the Merger and that exchanged the remainder of its Shares, if any,
for cash pursuant to the Offer generally will recognize capital gain or loss
measured by the difference between the amount of cash received with respect to
each Share and the adjusted tax basis of each such Share exchanged therefor.
Such capital gain or loss will be long-term capital gain or loss if the
shareholder's holding period with respect to its Shares exceeds one year.
A holder of Shares that exchanges some of its Shares for cash pursuant to
the Merger and that exchanged some of its Shares for Union Pacific common stock
pursuant to the Offer generally will recognize gain (but not loss) in an amount
equal to the lesser of (1) the aggregate amount of cash received pursuant to
the Merger and the Offer and (2) an amount equal to the excess, if any, of (a)
the sum of the aggregate amount of cash received pursuant to the Merger and the
Offer and the fair market value of the Union Pacific common stock received
pursuant to the Offer over (b) the holder's adjusted tax basis in its Shares.
The gain recognized will be capital gain unless the receipt of cash by the
holder has the effect of a distribution of a dividend, in which case such gain
will be treated as ordinary dividend income to the extent of the holder's
ratable share of accumulated earnings and profits as calculated for United
States federal income tax purposes. Any recognized capital gain will be
long-term capital gain if the shareholder's holding period with respect to its
Shares exceeds one year.
The cash payments made to a shareholder pursuant to the Merger will be
subject to U.S. federal backup withholding unless the shareholder provides the
Paying Agent with his, her or its taxpayer identification number (social
security number of employer identification number) and certifies that such
number is correct and that such shareholder is not subject to backup
withholding, or unless the shareholder establishes another basis for exemption
from backup withholding.
The foregoing discussion is intended only as a summary and does not purport
to be a complete analysis or listing of all potential federal income tax
consequences of the Merger. Motor Cargo shareholders are urged to consult their
own tax advisors concerning the United States federal, state, local and foreign
tax consequences of the Merger to them.
FAIRNESS OF THE MERGER
Position of Union Pacific and Merger Subsidiary as to the Fairness of the Merger
Because Union Pacific currently beneficially owns, and Merger Subsidiary
will beneficially own, a majority of the Shares, Union Pacific and Merger
Subsidiary are deemed to be "affiliates" of Motor Cargo within the meaning of
Rule 13e-3 under the Exchange Act. Accordingly, Union Pacific and Merger
Subsidiary as affiliates of Motor Cargo, are required to express their belief
as to the substantive and procedural fairness of the Merger to Motor Cargo's
unaffiliated shareholders (i.e., the Public Shareholders).
Union Pacific and Merger Subsidiary have determined that the Merger is both
substantively and procedurally fair to the Public Shareholders. This belief is
based on the following factors, each of which, in the view of Union Pacific and
Merger Subsidiary support such determination:
. The Board of Directors of Motor Cargo unanimously approved the Merger
Agreement and the Merger after arms-length negotiations with Union
Pacific prior to the existence of an affiliate relationship between
Motor Cargo and either Union Pacific or Merger Subsidiary. At the time
of this approval, the Motor Cargo Board of Directors had six members,
three of whom were not employees of Motor Cargo. See "Background of the
Offer" in the Prospectus and Item 4, "The Solicitation or
Recommendation," in the Schedule 14D-9.
. On October 15, 2001, the Board of Directors of Motor Cargo approved and
adopted the Merger Agreement, including the Offer and the Merger, and
determined that the terms of the Offer and the Merger were advisable and
fair to, and in the best interests of, the shareholders of Motor Cargo.
See "Reasons for the Offer--Reasons for the Recommendation of Motor
Cargo's Board of Directors; Factors Considered" in the Prospectus and
Item 4, "The Solicitation or Recommendation," in the Schedule 14D-9 for
the recommendation of the Board of Directors of Motor Cargo relating to
the Offer and the reasons for the recommendation.
8
. Harold R. Tate, previously Motor Cargo's majority shareholder, was in
favor of the Offer and the Merger and exchanged all of his Shares in the
Offer.
. The Board of Directors of Motor Cargo received an opinion, dated October
15, 2001, from Morgan Keegan & Company, Inc. ("Morgan Keegan") to the
effect that, as of the date of the opinion and based upon the
assumptions, limitations and qualifications in the opinion, the
consideration to be received by shareholders of Motor Cargo pursuant to
the Offer and the Merger is fair to those shareholders from a financial
point of view. The summary of the Morgan Keegan opinion, which sets
forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is contained in the Schedule
14D-9 and the full text of the Morgan Keegan opinion is attached as
Annex II to the Schedule 14D-9.
. As discussed below, since the date of the Merger Agreement, no party
made Motor Cargo a "superior proposal" which would have allowed the
Motor Cargo Board to make a "subsequent determination." The Merger
Agreement could be terminated by Motor Cargo if Motor Cargo made a
subsequent determination in compliance with the Merger Agreement,
provided Motor Cargo paid Union Pacific a termination fee. See "The
Merger Agreement--Covenants" and "The Merger Agreement--Termination of
the Merger Agreement" in the Prospectus for more information relating to
a subsequent determination and this right of termination.
. The concurrence of a majority of the directors of Motor Cargo in office
prior to the existence of an affiliate relationship between Motor Cargo
and either Union Pacific or Merger Subsidiary is required to:
. amend or terminate the Merger Agreement;
. extend or waive the time for the performance of any of the
obligations or other acts of Union Pacific or Merger Subsidiary under
the Merger Agreement; or
. waive any of Motor Cargo's rights under the Merger Agreement.
. The Merger represents an opportunity for the unaffiliated shareholders
of Motor Cargo to realize cash for their Shares, which would otherwise
be extremely difficult given the illiquidity of the market for Shares
following the Offer.
. The Merger will provide consideration to Motor Cargo's unaffiliated
shareholders entirely in cash and is not subject to any financing
condition.
. The unaffiliated shareholders of Motor Cargo are entitled to exercise
dissenters' rights and demand payment of the "fair value" for their
Shares.
. The Merger Agreement provided all shareholders of Motor Cargo with an
opportunity to elect to receive either $12.10 in cash or 0.26 of a share
of Union Pacific common stock in the Offer and more than 99% of the
Shares were tendered in the Offer.
Although the Merger does not require the approval of a majority of
unaffiliated shareholders or any further approval by a majority of
disinterested directors and there has not been a representative of the
unaffiliated shareholders to negotiate on their behalf, Union Pacific and
Merger Subsidiary believe that the Merger is substantively and procedurally
fair based on the following analysis. The Merger Agreement and the Merger were
unanimously approved by the Board of Directors of Motor Cargo prior to the
existence of an affiliate relationship between Motor Cargo and either Union
Pacific or Merger Subsidiary. This approval was reached only after arms-length
negotiation between Union Pacific and Motor Cargo, which began for a brief
period in March and April 2001 and resumed in September 2001. In reaching its
determination that the Offer and the Merger were advisable and fair to, and in
the best interests of, the shareholders of Motor Cargo, the Board of Directors
of Motor Cargo relied in part upon an analysis prepared by Morgan Keegan as to
the fairness of the consideration offered in the Offer and the Merger that
resulted from the application of several accepted valuation methodologies. The
view is consistent with the preliminary financial analysis provided by Morgan
Stanley & Co. Incorporated ("Morgan Stanley") to a representative of Union
Pacific's management, which included a review of publicly available
9
financial statements of Motor Cargo, trading prices of the Shares from the date
of Motor Cargo's initial public offering through October 8, 2001, and the
publicly available financial terms of certain comparable transactions and a
comparison of Motor Cargo's financial performance to the financial performance
of certain other publicly available companies. See "Reports, Opinions,
Appraisals and Negotiations--Presentation of Morgan Stanley."
Union Pacific and Merger Subsidiary, in connection with their review of
Morgan Stanley's preliminary financial analysis and in the course of their
negotiations with Motor Cargo, also considered whether the $12.10 per Share to
be paid as consideration in the Merger was fair in relation to current market
prices, historical market prices and going concern value (i.e., EBITDA multiple
analyses) of Motor Cargo. While Union Pacific and Merger Subsidiary believe
that, when viewed as a whole, the analyses support their determination of
fairness, several of the EBITDA multiple analyses described below are below the
range of implied values and are not considered supportive of fairness. Union
Pacific and Merger Subsidiary believe that selecting any portion of the
analyses, without considering the analyses and the negotiations as a whole,
would create an incomplete view of the process by which Union Pacific and
Merger Subsidiary arrived at their belief that the Merger is fair. The
following provides a summary of the analyses considered:
. Current and Historical Market Price. A review of current and historical
market prices as of the date of the execution of the Merger Agreement
indicate that the $12.10 per Share to be paid as consideration in the
Merger represents a premium of approximately 27% to over 50% of the
stock price of Motor Cargo for the 12 month period immediately preceding
the execution of the Merger Agreement. Based on the unaffected price of
$8.00 per Share, the $12.10 per Share to be paid as consideration in the
Merger represents a premium of 51.3%.
. Precedent Transaction Analysis. The premium with respect to the
unaffected price of 51.3% is within the premium range of 16% to 61% for
other selected business combination transactions and is above the median
premium of 43%. The $12.10 per Share to be received in the Merger,
however, represents a multiple of 4.1 times Motor Cargo's EBITDA for the
last twelve months which is below the EBITDA multiple range of 5.7 to
11.0 for the precedent transactions.
. Comparable Public Company Analysis. The $12.10 per Share to be received
in the Merger represents a multiple of 4.1 times Motor Cargo's EBITDA
for the last twelve months which is within the EBITDA multiple range of
3.4 to 5.3 for the precedent transactions but below the median multiple
of 4.5. The $12.10 per Share to be received in the Merger represents a
multiple of 4.0 times Motor Cargo's EBITDA for the 2001 calendar year
which is below the EBITDA multiple range of 4.9 to 5.8 for the precedent
transactions.
In making their determination, neither Union Pacific nor Merger Subsidiary
have considered the following factors, nor believe such factors are relevant to
the fairness of the Merger:
. Book Value. Union Pacific and Merger Subsidiary believe that the book
value, which was $9.60 per Share on September 30, 2001, is indicative of
historical cost and that the valuation methodologies used by Morgan
Stanley in its preliminary valuation analyses better incorporate the
future expected performance and business prospects of Motor Cargo.
. Motor Cargo Repurchases. Union Pacific and Merger Subsidiary did not
rely on the purchase price paid in previous repurchases by Motor Cargo
and do not believe that Motor Cargo's isolated repurchases are
particularly indicative of the value of Motor Cargo as a going concern
in view of the other analyses performed. Motor Cargo's repurchases, the
last of which occurred approximately nine months prior to the execution
of the Merger Agreement, form a portion of the historical stock price
analysis described above. See Item 2(f) for a description of Motor
Cargo's repurchases.
. Liquidation Value. Union Pacific did not find it practicable to, and
did not, appraise the assets of Motor Cargo to determine the liquidation
value of the Shares. Union Pacific did not intend to liquidate Motor
Cargo and considered Motor Cargo as a viable going concern business and
did not consider the liquidation value as a relevant valuation
methodology.
10
During the negotiation of the Merger Agreement, neither Union Pacific nor
Merger Subsidiary were aware of, and subsequent to the completion of the Offer
Union Pacific and Merger Subsidiary have been advised by Motor Cargo that there
were not, any firm offers to acquire Motor Cargo by any unaffiliated persons
during the two years preceding the execution of the Merger Agreement.
Accordingly, neither Union Pacific nor Merger Subsidiary considered such factor
in making their determination.
In addition, Motor Cargo demanded a right to terminate the Merger Agreement
if it made a subsequent determination as a result of the fiduciary duties of
the Motor Cargo Board of Directors. This right of termination permits Motor
Cargo to agree to, or recommend, an alternative transaction proposed by a third
party in the event the Motor Cargo Board of Directors believes that the
alternative transaction is a superior transaction, provided certain conditions
are met. Despite the presence of this right to terminate the Merger Agreement
and accept or recommend a third party proposal, no third party has approached
Motor Cargo with, or otherwise made, an alternative acquisition proposal.
Furthermore, the Merger Agreement provides that it may not be amended or
terminated without the approval of a majority of the directors of Motor Cargo
in office prior to the existence of an affiliate relationship between Motor
Cargo and either Union Pacific or Merger Subsidiary.
The unaffiliated shareholders are also entitled to exercise dissenters'
rights and receive a court-determined fair value for their Shares under Part 13
of the URBCA (see Item 4(d), "Terms of the Transaction--Dissenters' Rights").
While the Merger has been structured in compliance with Section 16-10a-1104 of
the URBCA, which prescribes procedures for "short-form" mergers, Union Pacific
is providing advance notice of the Merger.
In making the determination as to fairness, Union Pacific, Merger Subsidiary
and Motor Cargo also had access to the projections prepared by Motor Cargo's
management with respect to the period from 2001 through 2005 (the
"Projections"). The Projections are set forth in "Certain
Projections--Unaudited" in the Prospectus. Union Pacific and Merger Subsidiary
have considered all of the foregoing factors and related analyses as a whole to
support their belief that the Merger is substantively and procedurally fair to
the Public Shareholders.
In addition to the foregoing factors and analyses that support Union
Pacific's and Merger Subsidiary's belief that the Merger is procedurally and
substantively fair to the Public Shareholders, Union Pacific and Merger
Subsidiary have considered the following three negative factors:
. following the consummation of the Merger, the Public Shareholders will
cease to participate in the future increase, if any, in the value of
Motor Cargo;
. because the Merger is being effected pursuant to a short-form merger
under Section 16-10a-1104 of the URBCA and consequently does not require
further approval by Motor Cargo's board of directors or Motor Cargo's
shareholders (other than Union Pacific), the Public Shareholders will
not have the opportunity to vote on the Merger; and
. Although the Offer and the Merger were unanimously approved by the Motor
Cargo Board of Directors, including three directors who were not
employees of Motor Cargo, Motor Cargo's Board of Directors did not
establish a special committee consisting of non-management, independent
directors for the purpose of representing solely the interests of the
Public Shareholders.
After giving these additional three factors due consideration, Union Pacific
and Merger Subsidiary have concluded that none of these factors, alone or in
the aggregate, is significant enough to outweigh the factors and analyses that
Union Pacific and Merger Subsidiary have considered to support their belief
that the Merger is substantively and procedurally fair to the Public
Shareholders.
In view of the number and wide variety of factors considered in connection
with making a determination as to the fairness of the Merger to the Public
Shareholders, and the complexity of these matters, Union Pacific and Merger
Subsidiary did not find it practicable to, nor did it attempt to, quantify,
rank or otherwise assign relative weights to the specific factors they
considered. Moreover, Union Pacific and Merger Subsidiary have not undertaken
to make any specific determination or assign any particular weight to any
single factor, but have conducted an overall analysis of the factors described
above.
11
Union Pacific and Merger Subsidiary have not considered any factors, other
than as stated above, regarding the fairness of the Merger to the Public
Shareholders, as it is Union Pacific's and Merger Subsidiary's view that the
factors they considered provided a reasonable basis to form their belief.
Position of Motor Cargo as to the Fairness of the Merger
As a filing entity of this Statement, Motor Cargo is required to express its
belief as to the substantive and procedural fairness of the Merger to the
Public Shareholders.
On October 15, 2001, the Board of Directors of Motor Cargo, by unanimous
vote, approved and adopted the Merger Agreement and the transactions
contemplated by it, including the Offer and the Merger. The Board of Directors
unanimously agreed that the Offer and the Merger were fair to and in the best
interests of Motor Cargo and its shareholders.
The Board of Directors of Motor Cargo believed that the Offer and the Merger
were procedurally fair since the terms of the Merger Agreement and the
transactions contemplated thereby, including the terms of the Offer and the
Merger, were agreed to by Motor Cargo, Union Pacific and Merger Subsidiary
after arms-length negotiations prior to the existence of an affiliate
relationship between Motor Cargo and either Union Pacific or Merger Subsidiary.
While the Board of Directors recognized, that certain directors could be viewed
as having conflicting interests by virtue of their employment with Motor Cargo,
the interests of those directors to maximize the value received for the Shares
were aligned with the interests of the Public Shareholders. The Board of
Directors approved the transaction only after receiving disclosure of the
potential conflicting interests in accordance with Section 16-10a-850(4) of the
Utah Revised Business Corporation Act. In view of the arms-length negotiations
and the alignment of director and Public Shareholder interests, the Board of
Directors believed that sufficient procedural safeguards were present to ensure
the fairness of the Merger and to protect the interests of the Public
Shareholders, and therefore there was no need to require the approval of a
majority of unaffiliated shareholders of Motor Cargo. Further, the Board of
Directors did not believe it was necessary to appoint an independent committee
of the Board and have them retain an unaffiliated representative to act solely
on behalf of unaffiliated security holders for purposes of negotiating the
terms of the transaction or preparing a report concerning the fairness of the
transaction. Moreover, the Merger Agreement and the transactions contemplated
thereby received unanimous approval of the Board of Directors, including the
approval of three directors who were not employees of Motor Cargo.
In addition, in making this determination, the Board of Directors of Motor
Cargo considered a number of factors which are described below and in the
attached Schedule 14D-9, each of which in the view of the Board of Directors
supported such determination:
. Morgan Keegan Opinion. The Board of Directors considered the opinion of
Morgan Keegan that, as of such date and based on and subject to the
matters set forth therein, the consideration to be received pursuant to
the Offer and the Merger was fair, from a financial point of view, to the
shareholders of Motor Cargo. The opinion and presentation of Morgan Keegan
are described under "Reports, Opinions, Appraisals and Negotiations,"
below. A copy of the Morgan Keegan opinion is set forth in Annex II to the
Schedule 14D-9 which is attached to this Statement as Annex B.
. Current Market Price. The Board of Directors considered the current
market price of the Shares. Specifically, the Board of Directors noted the
21.6% premium the $12.10 in cash offered pursuant to the Merger
represented over the closing price of the Shares of $9.95 on the last
trading day immediately prior to October 15, 2001.
. Historical Market Price. The Board of Directors also considered the
historical market prices of the Shares since Motor Cargo's initial public
offering in December 1997. Specifically, the Board of Directors considered
that the $12.10 in cash offered pursuant to the Merger was higher than the
1997 IPO price of $12.00 per Share and that the average market price of
the Shares since October 16, 2000 was $8.00 per Share.
12
The Board of Directors also recognized that the market price of the Shares
had remained significantly below the IPO price since 1998.
. Book Value. Although the Board of Directors noted that the $12.10 per
Share to be received in the Merger was greater than the book value per
Share, the Board of Directors did not give significant weight to the book
value of the Shares, which was $9.60 per Share as of September 30, 2001.
Book value is indicative of historical cost and the Board of Directors
believed that other valuation methodologies, including those used by
Morgan Keegan in its presentation, better reflect the future performance
and business prospects of Motor Cargo.
. Discounted Cash Flow. The Board of Directors considered the discounted
cash flow analysis prepared by Morgan Keegan as an indicator of Motor
Cargo's going concern value. Based upon this analysis, Morgan Keegan
calculated an implied price per share range of $10.47 to $13.53 for the
Shares. The Board of Directors noted the fact that the Merger
Consideration of $12.10 was higher than the midpoint of this range. The
Board of Directors also considered that a number of other methodologies
used by Morgan Keegan supported the conclusion that the Merger
Consideration was fair in light of the estimated going concern value of
Motor Cargo.
In making its determination, the Board of Directors did not consider the
following factors, nor did it believe such factors were relevant to the
fairness of the Merger:
. Motor Cargo Repurchases. The Board of Directors did not consider the
prices paid by Motor Cargo for Shares repurchased pursuant to its
open-market repurchase program. The last purchase by Motor Cargo pursuant
to the share repurchase program occurred approximately nine months prior
to the execution of the Merger Agreement. Therefore, the Board of
Directors did not believe the purchase prices for share repurchases were
relevant to its determination that the Merger was fair to Motor Cargo's
shareholders.
. Liquidation Value. The Board of Directors did not find it practicable to,
and did not, appraise the its assets to determine the liquidation value of
the Shares. The Board of Directors believes Motor Cargo should be valued
as a viable going concern business and did not consider the liquidation
value as a relevant valuation methodology.
. No Prior Firm Offers. The Board of Directors did not consider any firm
offers during the past two years to acquire Motor Cargo. Although Motor
Cargo had discussions with certain other companies relating to a possible
business combination, none of these discussions resulted in firm offers or
definitive terms that would be useful in determining the fairness of the
Merger.
The Board of Directors also considered the fact that the holders of Shares
will not participate in the future growth of Motor Cargo. The Board of
Directors also considered the relatively thin trading market and the lack of
liquidity of the Shares. Because of the risks and uncertainties associated with
Motor Cargo's future prospects and the nature of the public markets, the Board
of Directors concluded that these factors were not quantifiable. The Board of
Directors concluded that obtaining a premium for the Shares now was preferable
to enabling the Motor Cargo shareholders to have a speculative potential future
return.
The Board of Directors also considered the fact that the Public Shareholders
are entitled to exercise dissenters' rights and demand payment of the "fair
value" for their Shares.
For additional information with respect to the factors considered by the
Board of Directors of Motor Cargo in determining the fairness of the Offer and
the Merger, see Item 4, "The Solicitation and Recommendation" in the Schedule
14D-9, attached to this Statement as Annex B and incorporated herein by
reference.
In view of the number and wide variety of factors that the Board of
Directors considered in connection with making a determination as to the
fairness of the Offer and the Merger to the Public Shareholders, and the
complexity of these matters, the Board of Directors did not find it practicable
to, nor did it attempt to, quantify,
13
rank or otherwise assign relative weights to the specific factors it
considered. Moreover, the Board of Directors has not undertaken to make any
specific determination or assign any particular weight to any single factor,
but has conducted an overall analysis of the factors described above. In
addition, individual members of the Board of Directors may have given different
weights to different factors. Rather, the Board of Directors viewed its
position and recommendation as being based on the totality of the information
presented to and considered by it.
REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
Opinion and Presentation of Morgan Keegan
Motor Cargo retained Morgan Keegan pursuant to an engagement letter
agreement, dated January 16, 2001, to act as its exclusive financial advisor
with respect to a possible business combination involving Motor Cargo. In
connection with Morgan Keegan's engagement, Morgan Keegan rendered an opinion
to the Board of Directors of Motor Cargo regarding, among other things, the
Merger. Pursuant to the terms of the engagement letter, Motor Cargo has agreed
to pay Morgan Keegan a fee of approximately $1,350,000 including any expenses
incurred. See "Fairness of the Merger" above and Item 4, "The Solicitation and
Recommendation," in the Schedule 14D-9 for more information regarding Morgan
Keegan's opinion and the terms of its engagement. A copy of Morgan Keegan's
report to the Board of Directors of Motor Cargo in support of its fairness
opinion is filed as Exhibit (c)(2) to this Statement. The report and opinion
delivered by Morgan Keegan are available for inspection and copying at the
principal executive offices of Motor Cargo during regular business hours by any
Motor Cargo shareholder or a representative who has been so designated in
writing upon written request and at the expense of the requesting shareholder.
Presentation of Morgan Stanley
Union Pacific retained Morgan Stanley pursuant to an engagement letter,
dated January 26, 2001, to act as its financial advisor in connection with the
possible acquisition by Union Pacific of Motor Cargo. Morgan Stanley did not
act as adviser to, or agent of, any other person in connection with the Offer.
On October 10, 2001, Morgan Stanley provided a representative of Union
Pacific's management with a preliminary valuation analysis of Motor Cargo. The
following is a summary of the material financial and comparative analyses
performed by Morgan Stanley in connection with its preliminary valuation
analysis. The objective of the presentation was to provide Union Pacific's
management with a financial analysis of the contemplated cash offer price of
$12.10 per share of Motor Cargo common stock and does not represent a fairness
opinion on a potential or contemplated transaction.
In preparing the preliminary valuation analysis, Morgan Stanley, among other
things:
. reviewed certain publicly available financial statements and other
information of Motor Cargo;
. reviewed the reported prices and trading activity for the Motor Cargo
shares;
. compared the financial performance of Motor Cargo with that of certain
other comparable publicly traded companies;
. reviewed the financial terms, to the extent publicly available, of certain
comparable transactions; and
. performed such other analyses and considered such other factors as it
deemed appropriate.
At Union Pacific's request, no legal or accounting due diligence on Motor
Cargo was performed by Morgan Stanley nor were any legal or accounting advisors
retained for this purpose.
In preparing the preliminary valuation analysis, Morgan Stanley assumed and
relied upon, without independent verification, the accuracy and completeness of
the information reviewed by it for purposes of
14
presentation. With respect to financial forecasts, Morgan Stanley used
information from a publicly available ING Barings Equity Research report dated
November 8, 2000. Morgan Stanley did not make an independent valuation or
appraisal of the assets or liabilities of Motor Cargo, nor was Morgan Stanley
provided with any such valuation or appraisal. Morgan Stanley did not review
the tax or accounting treatment of any transaction and its analyses do not
cover such tax or accounting treatment, nor does it assume any particular tax
or accounting treatment. Morgan Stanley analyses were based on financial,
economic, market and other conditions prevailing as of October 10, 2001.
Precedent Transactions Analysis. Morgan Stanley compared certain financial
information of Motor Cargo with the same information with respect to seven
less-than-truckload ("LTL") acquisition transactions announced between July 10,
1995 and August 22, 2001 that Morgan Stanley believed to be appropriate for
comparison. The financial information compared for each target included the
premium of the price per share paid in the acquisition over the price per share
of the target one month prior to the announcement of the acquisition (or
"unaffected price"), the approximate equity and aggregate dollar value of each
transaction, as well as multiples of (a) revenue, (b) EBIT, which is earnings
before interest and taxes, (c) EBITDA, which is earnings before interest,
taxes, depreciation and amortization, and (d) earnings paid if available for
each transaction.
Morgan Stanley noted the following data for its transactional analysis:
Last Twelve
Premium to Months EBITDA
Unaffected Price Multiple Range
---------------- --------------
Range..................................... 16% to 61% 5.7x - 11.0x
Median.................................... 43% 7.7x
Motor Cargo Cash Offer of $12.10 per Share 51.3% 4.1x
Morgan Stanley noted that the representative premiums of transaction price
to public market price in the precedent "acquisition" transactions ranged from
40% to 60%. Morgan Stanley also noted that the $12.10 cash offer price
represents a significant discount from the EBITDA for the last twelve months.
Morgan Stanley observed that the "acquisition" premium proposed by Union
Pacific for its cash offer was 51.3% based on an unaffected price of $8.00 per
share of Motor Cargo common stock.
Comparable Public Companies Analysis. Using publicly available information,
Morgan Stanley compared certain financial and other information for Motor Cargo
with the corresponding financial and other information for the following
companies with lines of business believed to be generally comparable to Motor
Cargo:
. USFreightways Corporation
. CNF, Inc.
. Old Dominion Freight, Inc.
. Arnold Industries, Inc.
. Roadway Express, Inc.
. Yellow Corporation
. Arkansas Best Corporation
. Consolidated Freightways Corporation
The financial information compared included current per share stock price,
equity value, enterprise value, the ratio of price to earnings per share for
each of the next twelve months, the estimated calendar year 2001 and the
estimated calendar year 2002, estimates of long-term growth of earnings per
share, estimates of the ratio of price to earnings growth for the next twelve
months, and the ratio of the enterprise value to each of (a) EBIT and (b)
EBITDA for each of the last twelve months, the estimated calendar year 2001 and
the estimated calendar year 2002. Enterprise value is defined as the market
value of equity on a diluted basis plus the value of debt, preferred equity and
minority interest minus cash of Motor Cargo.
15
Morgan Stanley noted the following data for regional, non-unionized LTL
carriers:
Comparable Company Comparable Company
Last Twelve Months 2001 Calendar Year
Multiple Range Multiple Range
------------------ ------------------
EBITDA........................................... 3.4x - 5.3x 4.9x - 5.8x
Median........................................... 4.5x 5.3x
Motor Cargo Cash Offer of $12.10 per Share....... 4.1x 4.0x
Historical Stock Price Analysis. Morgan Stanley also reviewed the closing
prices of the Shares for various periods ending October 8, 2001, and observed
that the average closing price per Share was as follows:
Average Closing
Period Price
------ ---------------
Since IPO................................... $7.77
One year ending October 8, 2001............. 7.93
6 months ending October 8, 2001............. 8.92
3 months ending October 8, 2001............. 8.83
Approximate Unaffected Stock Price.......... 8.00
Exchange Ratio Analysis. Morgan Stanley also reviewed the exchange ratios
of Motor Cargo Shares to Union Pacific shares for various periods ending
October 8, 2001 and observed that the average exchange ratio was as follows:
Average Motor Cargo
Shares per
Union Pacific
Period Share
------ -------------------
6 months ending October 8, 2001 0.17
3 months ending October 8, 2001 0.17
October 8, 2001................ 0.20
Motor Cargo Offer.............. 0.26
The preceding discussion is a summary of the material financial analyses
performed by Morgan Stanley in connection with its preliminary valuation
analysis presented to a representative of Union Pacific's management, but it
does not purport to be a complete description of the analyses performed by
Morgan Stanley or of its presentation to Union Pacific's management
representative. The preparation of financial analyses is a complex process
involving subjective judgments, and is not necessarily susceptible to partial
analysis or summary description. Morgan Stanley made no attempt to assign
specific weights to particular analyses or factors considered, but, rather,
made qualitative judgments as to the significance and relevance of all the
analyses and factors considered. Accordingly, Morgan Stanley believes that its
analyses and the summary set forth above must be considered as a whole, and
that selecting portions of the analyses and of the factors considered by Morgan
Stanley, without considering all of the analyses and factors, could create a
misleading or incomplete view of the processes underlying the analyses
conducted by Morgan Stanley.
With regard to the precedent transactions analysis and the comparable
companies analysis summarized above, Morgan Stanley selected such precedent
transactions and such comparable public companies on the basis of various
factors; however, no transaction or company utilized as a comparison in these
analyses summarized above is identical to Motor Cargo or Union Pacific. As a
result, these analyses are not purely mathematical, but also take into account
significant differences in financial, operating and other characteristics of
the transactions and the subject companies and other factors that could affect
the public trading value of the subject companies to which Motor Cargo is being
compared.
In its analyses, Morgan Stanley made numerous assumptions with respect to
Motor Cargo, industry performance, general business, economic, market and
financial conditions, and other matters, many of which are
16
beyond the control of Motor Cargo. Any estimates contained in Morgan Stanley's
analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by these analyses. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which
companies may actually be sold. Because these estimates are inherently subject
to uncertainty, none of Motor Cargo, Union Pacific, Morgan Stanley or any other
person assumes responsibility if future results or actual values differ
materially from the estimates.
Morgan Stanley's analyses were prepared solely as part of its presentation
to a representative of Union Pacific's management in respect of the pricing
analysis for the acquisition of Motor Cargo by Union Pacific. Morgan Stanley's
analyses were only one of the factors taken into consideration by Union Pacific
in forming its view that the consideration paid by Union Pacific in the Merger
was fair. Morgan Stanley was not asked to, and did not express any opinion as
to the fairness of the consideration paid by Union Pacific in the Offer or the
Merger. Morgan Stanley's analyses were not intended to and did not constitute a
recommendation to any holder of Motor Cargo shares as to whether any such
holder should have tendered shares in the Offer or, if applicable, take any
action in connection with the Merger.
Union Pacific retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. Morgan Stanley, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
Morgan Stanley is a full service securities firm engaged in securities
trading and brokerage activities, financing and financial advisory services in
addition to its investment banking activities. In the ordinary course of its
trading, brokerage, and financing activities, Morgan Stanley or its affiliates
may at any time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the accounts of its customers, in debt or
equity securities or senior loans of Motor Cargo, Union Pacific or their
affiliates. Morgan Stanley has from time to time rendered investment banking
and financial advisory services to Union Pacific.
Pursuant to Morgan Stanley's engagement letter, Morgan Stanley will receive
a transaction fee of $975,000 from Union Pacific upon consummation of the
Merger. In addition, Union Pacific also has agreed to reimburse Morgan Stanley
for its reasonable travel and other expenses incurred in connection with its
engagement and to indemnify Morgan Stanley and certain related persons against
certain liabilities, including certain liabilities under the federal securities
laws, and expenses relating to or arising out of its engagement.
A copy of Morgan Stanley's presentation of the foregoing analysis provided
to a representative of Union Pacific's management on October 10, 2001 is
included as an exhibit to this Statement and the foregoing summary is qualified
by reference to that exhibit. A copy of Morgan Stanley's presentation is
available for inspection and copying at the principal offices of Motor Cargo
during regular business hours by any Motor Cargo shareholder or a
representative who has been so designated in writing upon written request and
at the expense of the requesting shareholder.
17
TRANSACTION STATEMENT
ITEM 1. SUMMARY TERM SHEET
See the section above captioned "Summary Term Sheet."
ITEM 2. SUBJECT COMPANY INFORMATION
(a) NAME AND ADDRESS. The name of Motor Cargo is Motor Cargo Industries,
Inc. The principal executive offices of Motor Cargo are located at 845 West
Center Street, North Salt Lake, Utah 84054, and its telephone number is (801)
936-1111.
Motor Cargo is subject to the informational reporting requirements of the
Exchange Act and in accordance therewith is required to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Such reports, proxy statements and other
information are available for inspection and copying at the Commission's public
reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the regional office of the Commission located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may be
obtained at prescribed rates from the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a web
site that contains reports, proxy and information statements and other
information regarding registrations that file electronically with the
Commission at http://www.sec.gov.
(b) SECURITIES. The exact title of the class of equity securities subject
to the Merger is: Common Stock, no par value, of Motor Cargo. As of January 15,
2002, there were 6,823,540 Shares outstanding.
(c) TRADING MARKET AND PRICE. The Shares trade on the Nasdaq National
Market under the symbol "CRGO." The following table sets forth the high and low
closing sales prices per Share for each of the periods indicated, as reported
on the Nasdaq National Market. Subsequent to November 30, 2001, the date Shares
were accepted by Union Pacific pursuant to the Offer, there have been limited
quotations as a result of the limited public float.
Motor Cargo
Common Stock
------------
Market Price
------------
High Low
------ -----
1999
First Quarter................................................ $ 8.50 $4.00
Second Quarter............................................... 8.91 5.00
Third Quarter................................................ 8.50 6.13
Fourth Quarter............................................... 7.19 3.38
2000
First Quarter................................................ $ 5.38 $4.00
Second Quarter............................................... 6.00 4.25
Third Quarter................................................ 6.13 4.50
Fourth Quarter............................................... 7.61 5.00
2001
First Quarter................................................ $ 9.75 $5.75
Second Quarter............................................... 10.00 7.00
Third Quarter................................................ 9.75 6.56
Fourth Quarter............................................... 14.50 9.30
18
Shareholders are urged to obtain a current market quotation for their Shares.
(d) DIVIDENDS. Motor Cargo has never declared or paid any dividends in
respect of the Shares.
(e) PRIOR PUBLIC OFFERINGS. None of Union Pacific, Motor Cargo or Merger
Subsidiary has made an underwritten public offering of the Shares for cash
during the past three years that was registered under the Securities Act of
1933 or exempt from registration thereunder pursuant to Regulation A.
(f) PRIOR STOCK PURCHASES. None of Union Pacific or Merger Subsidiary, nor
any affiliate of any of Union Pacific or Merger Subsidiary, has purchased any
Shares during the past two years, except as described under Item 5(e). Since
September 30, 1999, Motor Cargo has purchased an aggregate of 451,900 Shares
pursuant to its Share repurchase program. Motor Cargo acquired these Shares in
open market purchases at prices ranging from $4.50 per Share to $7.50 per
Share. The following table sets forth the number of Shares purchased and the
average price paid per Share by Motor Cargo for each quarter during the period
from September 30, 1999 through March 31, 2001. Motor Cargo has not purchased
any of its Shares since January 10, 2001.
Quarter Ending Shares Purchased Average Price Paid
-------------- ---------------- ------------------
December 31, 1999 0 N/A
March 31, 2000 124,200 $4.66
June 30, 2000 70,000 5.00
September 30, 2000 79,500 6.05
December 31, 2000 177,200 6.63
March 31, 2001 1,000 7.50
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSONS
UNION PACIFIC CORPORATION
(a) NAME AND ADDRESS. The name of Union Pacific is Union Pacific
Corporation. The principal business address of Union Pacific is 1416 Dodge
Street, Omaha, Nebraska 68179, and its telephone number is (402) 271-5777.
(b) BUSINESS BACKGROUND OF ENTITY. Union Pacific was incorporated in Utah
in 1969. Union Pacific operates primarily in the areas of rail transportation,
through its subsidiary Union Pacific Railroad Company, and trucking, through
its subsidiary Overnite Transportation Company.
(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS. The name, business
address, position with Union Pacific, principal occupation, five-year
employment history and citizenship of each of the directors and executive
officers of Union Pacific, together with the names, principal businesses and
addresses of any corporations or other organizations in which such principal
occupations are conducted, are set forth in Annex A to the Prospectus, which is
incorporated herein by reference.
MOTOR MERGER CO.
(a) NAME AND ADDRESS. The name of Merger Subsidiary is Motor Merger Co.
The principal business address of Merger Subsidiary is 1416 Dodge Street,
Omaha, Nebraska 68179, and its telephone number is (402) 271-5777.
(b) BUSINESS BACKGROUND OF ENTITY. Merger Subsidiary was incorporated in
Utah in 2001 and is a wholly-owned subsidiary of Union Pacific. Merger
Subsidiary was formed for the sole purpose of merging with Motor Cargo.
19
(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS. The name, business
address, position with Merger Subsidiary, principal occupation, five-year
employment history and citizenship of each of the directors and executive
officers of Merger Subsidiary, together with the names, principal businesses
and addresses of any corporations or other organizations in which such
principal occupations are conducted, are set forth in Schedule I to this
Statement.
MOTOR CARGO INDUSTRIES, INC.
(a) NAME AND ADDRESS. See Item 2(a), "Subject Company Information--Name
and Address," in this Statement.
(b) BUSINESS BACKGROUND OF ENTITY. Motor Cargo is a Utah corporation
incorporated in 1996. Motor Cargo is a regional less-than-truckload carrier
that provides transportation and logistics services to shippers within the
western United States, including Arizona, California, Colorado, Idaho, Nevada,
New Mexico, Oregon, Texas, Utah and Washington. Motor Cargo transports general
commodities, including consumer goods, packaged foodstuffs, electronics,
computer equipment, apparel, hardware, industrial goods and auto parts for a
diversified customer base. Motor Cargo offers a broad range of services,
including expedited scheduling and full temperature-controlled service. Through
its wholly-owned subsidiary, MC Distribution Services, Inc., Motor Cargo also
provides customized logistics, warehousing and distribution management services.
(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS. The name, business
address, position with Motor Cargo, principal occupation, five-year employment
history and citizenship of each of the directors and executive officers of
Motor Cargo, together with the names, principal businesses and addresses of any
corporations or other organizations in which such principal occupations are
conducted, are set forth in Schedule I to this Statement, which is incorporated
herein by reference.
During the last five years, none of Union Pacific, Merger Subsidiary, Motor
Cargo or, to the best knowledge of Union Pacific, Merger Subsidiary and Motor
Cargo, any of the persons listed in Annex A to the Prospectus and Schedule I to
this Statement has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). During the last five years, none of Union
Pacific, Merger Subsidiary, Motor Cargo or, to the best knowledge of Union
Pacific, Merger Subsidiary and Motor Cargo, any of the persons listed in Annex
A to the Prospectus and Schedule I to this Statement was a party to any civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 4. TERMS OF THE TRANSACTION
(a) MATERIAL TERMS. Prior to the Effective Time, Union Pacific will
contribute its Shares to Merger Subsidiary, representing in the aggregate
approximately 99.7% of the Shares. At the Effective Time, Motor Cargo will
merge with and into Merger Subsidiary pursuant to Section 16-10a-1104 of the
URBCA, with Merger Subsidiary continuing as the surviving corporation. To
effect the Merger, the Board of Directors of Merger Subsidiary and Union
Pacific as the shareholder of Merger Subsidiary will approve the Merger and
Merger Subsidiary will deliver articles of merger to the Utah Department of
Commerce, Division of Corporations and Commercial Code for filing. At the
Effective Time:
. each Share issued and outstanding immediately prior to the Effective
Time will be cancelled and extinguished and each such Share (other than
Shares owned by Union Pacific, Merger Subsidiary or Motor Cargo and
Shares held by Public Shareholders, if any, who properly exercise their
statutory dissenters' rights under the URBCA) will be converted into and
become a right to receive the Merger Consideration; and
. each Share of Merger Subsidiary's capital stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding.
20
As a result of the Merger, Union Pacific will own all of the outstanding
equity interests in Merger Subsidiary and 100% of the business of Motor Cargo.
Under the URBCA, because Merger Subsidiary will hold at least 90% of the
outstanding Shares prior to the Merger, Union Pacific will have the power to
effect the Merger without a further vote of Motor Cargo's Board of Directors or
Public Shareholders. Union Pacific intends to take all necessary and
appropriate action to cause the Merger to become effective at the Effective
Time, without a meeting or consent of Motor Cargo's Board of Directors or the
Public Shareholders. The Merger Consideration payable to the Public
Shareholders is $12.10 in cash per Share. The reasons for the Merger are set
out in "Special Factors--Purposes, Alternatives, Reasons and Effects of the
Merger--Reasons" in this Statement. Certain federal income tax consequences of
the Merger are set out in "Special Factors--Certain Federal Income Tax
Consequences of the Merger" in this Statement.
Upon completion of the Merger, in order to receive the Merger Consideration
of $12.10 per Share in cash, each shareholder or a duly authorized
representative must (1) deliver a Letter of Transmittal, appropriately
completed and executed, to the Shareowner Services of the Paying Agent, at the
Corporate Action Department, P.O. Box 64858, St. Paul, Minnesota 55164-0858,
and (2) surrender such Shares by delivering the stock certificate or
certificates that, prior to the Merger, had evidenced such Shares to the Paying
Agent, as set forth in a Notice of Merger and Dissenters' Rights and Letter of
Transmittal, which will be mailed to shareholders of record promptly after the
Effective Time. Shareholders are encouraged to read the Notice of Merger and
Dissenters' Rights and Letter of Transmittal carefully when received. Delivery
of an executed Letter of Transmittal shall constitute a waiver of statutory
dissenters' rights.
The Merger will be accounted for using the purchase method of accounting.
For a general summary of the material United States federal income tax
consequences, see "Special Factors--Certain Federal Income Tax Consequences of
the Merger" in this Statement.
(b) [Intentionally omitted.]
(c) DIFFERENT TERMS. Shareholders of Motor Cargo will be treated as
described in Item 4(a), "Terms of the Transaction--Material Terms" of this
Statement.
(d) DISSENTERS' RIGHTS. Motor Cargo shareholders who do not execute a
Letter of Transmittal and agree to receive the Merger Consideration will have
the right to exercise dissenters' rights and receive payment for the value of
their Shares as set forth in Part 13 of the URBCA, a copy of which is attached
as Annex D. Any obligations that Motor Cargo may have to dissenting
shareholders as set forth below will continue as obligations of the Merger
Subsidiary, the surviving corporation subsequent to the Merger. The following
summary is qualified in its entirety by the more detailed referenced provisions
of Part 13 of the URBCA that are attached; in the event of any inconsistency,
such provisions of Part 13 of the URBCA shall prevail.
Under Part 13 of the URBCA, a Motor Cargo shareholder wishing to assert
dissenters' rights must: (a) cause Motor Cargo to receive a payment demand by a
date specified in the Notice of Merger and Dissenters' Rights, which date will
not be fewer than 30 nor more than 70 days after the date the Notice of Merger
and Dissenters' Rights is given and (b) deposit certificates for the
certificated Shares for which payment is demanded. A Motor Cargo shareholder
wishing to exercise dissenters' rights must not return his or her Shares with
the Letter of Transmittal. In order for a Motor Cargo shareholder to be
entitled to payment for Shares, such shareholder must have been a shareholder
of Motor Cargo with respect to the Shares for which payment is demanded as of
the Effective Time. A Motor Cargo shareholder who does not satisfy the above
conditions is not entitled to demand payment for his or her Shares. As used
herein, a "Dissenting Shareholder" means a record holder of the dissenting
Shares and any appropriate transferee of record.
21
Motor Cargo shall provide a Notice of Merger and Dissenters' Rights to all
Shareholders who satisfy the foregoing conditions and who, therefore, are
eligible to demand payment for their Shares. The Notice of Merger and
Dissenters' Rights shall be sent no later than ten (10) days after the
Effective Time and shall: (a) state that the Merger was authorized and approved
by Merger Subsidiary and give notice of the proposed Effective Time of the
Merger; (b) state the address at which Motor Cargo will receive payment demands
and the address at which certificates for Shares must be deposited; (c) supply
a form for Dissenting Shareholders to demand payment, which form requests a
Dissenting Shareholder to state an address to which payment is to be made; (d)
set a date by which Motor Cargo must receive the payment demand and by which
certificates for dissenting Shares must be deposited at the address indicated,
which dates may not be fewer than 30 nor more than 70 days after the date the
Notice of Merger and Dissenters' Rights is given; and (e) be accompanied by a
copy of Part 13 of the URBCA.
A Dissenting Shareholder who is given the Notice of Merger and Dissenters'
Rights and wishes to assert dissenters' rights must, in accordance with the
terms of the dissenters' notice, cause Motor Cargo to receive a payment demand
in the same form referred to above or in another writing and must timely
deposit certificates for dissenting Shares as provided above. A Dissenting
Shareholder who does not meet the provisions of this paragraph is not entitled
to payment for Shares pursuant to dissenters' rights.
Upon compliance by the Dissenting Shareholder with all the requirements
described above and in Part 13 of the URBCA, Merger Subsidiary shall pay the
amount Motor Cargo estimates to be the fair value of the Dissenting
Shareholder's Shares, except for any Shares acquired by the Dissenting
Shareholder after the date of the Notice of Merger and Dissenters' Rights, to
which special provisions not summarized here apply, accompanied by Motor
Cargo's balance sheet as of the end of the most recent fiscal year; an income
statement for that year; statements of changes in shareholders' equity and cash
flows for that year; and the latest available interim financial statements, if
any. Such financial statements need not be audited.
Payment shall also be accompanied by a statement of Motor Cargo's estimate
of the fair value of the dissenting Shares and the amount of interest payable
with respect to such Shares, a statement of a dissatisfied dissenters' right to
demand payment, as discussed below, and a copy of Part 13 of the URBCA.
A Dissenting Shareholder may notify Motor Cargo of his or her own estimate
of the value of his or her Shares held and demand that Motor Cargo pay such
amount if the dissenter believes that the amount paid by Motor Cargo is less
than the fair value of the Shares or if Motor Cargo fails to make payment
within 60 days after the date set by it as the date by which it must receive
the payment demand. A dissenter waives the right to demand payment according to
this paragraph unless such Dissenting Shareholder causes Motor Cargo to receive
notice of his or her estimate within 30 days after Motor Cargo has made payment
for the Shares. If a demand for payment by the dissenter remains unresolved,
Motor Cargo shall commence a proceeding in the Second District Court, Davis
County, Utah, within 60 days after receiving the payment demand from the
dissenter and petition the court to determine the fair value of the Shares. If
Motor Cargo fails to commence such proceeding within such 60 days, it shall pay
to each dissenter whose demand remains unresolved the amount demanded. Each
such Dissenting Shareholder is entitled to judgment for the amount, if any, by
which the court finds that the fair value of his or her Shares, plus interest,
exceeds the amount paid by Motor Cargo or the amount Motor Cargo elected to
withhold payment under special provisions applicable to Shares acquired after
the date of the Notice of Merger and Dissenters' Rights. The court is required
to assess court costs, counsel fees and appraisal costs against Motor Cargo,
unless the court determines that the Dissenting Shareholder acted arbitrarily,
vexatiously, or not in good faith.
The value received in an appraisal proceeding may be more or less than the
$12.10 per share in cash consideration offered in the Merger. The statutory
right to dissent is set out in Part 13 of the URBCA and is complicated. Any
failure to comply with its terms will result in an irrevocable loss of such
right. Shareholders seeking to exercise their statutory right of dissent are
encouraged to seek advice from legal counsel.
Shareholders who receive cash for their Shares upon exercise of their
statutory right of dissent are urged to consult their own tax advisors
concerning the United States federal, state, local and foreign tax consequences
of their receipt of cash.
22
The foregoing summary does not purport to be a complete statement of the
procedures to be followed by shareholders desiring to exercise their
dissenters' rights and is qualified in its entirety by express reference to the
Part 13 of the URBCA, the full text of which is attached hereto as Annex D.
Shareholders are urged to read Annex D in its entirety since failure to comply
with the procedures set forth therein will result in the loss of dissenters'
rights.
(e) PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS. Union Pacific and Motor
Cargo do not intend to grant unaffiliated shareholders special access to Motor
Cargo's records in connection with the Merger. Union Pacific and Motor Cargo do
not intend to obtain counsel or appraisal services for unaffiliated
shareholders of Motor Cargo.
(f) ELIGIBILITY FOR LISTING OR TRADING. Not applicable.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
(a) TRANSACTIONS. The Merger follows a transaction pursuant to which Union
Pacific acquired over 99% of the outstanding Shares of Motor Cargo. Union
Pacific conducted an offer to exchange each outstanding Share and as a result
of the Offer, on November 30, 2001, Union Pacific acquired 6,801,327 Shares,
representing approximately 99.7% of the outstanding Shares as of November 30,
2001. See "The Offer" in the Prospectus for additional information regarding
the Offer. Union Pacific will transfer to Merger Subsidiary all 6,801,327
Shares acquired pursuant to the Offer immediately prior to the Merger.
In the Merger, all remaining outstanding Shares (other than Shares owned by
Union Pacific, Merger Subsidiary, Motor Cargo and Dissenting Shareholders) will
be canceled, extinguished and automatically converted into a right to receive
$12.10 per Share, net to the holder in cash and without interest.
(b) SIGNIFICANT CORPORATE EVENTS. Except as described in the Prospectus,
the Schedule 14D-9 or elsewhere in this Statement, there have been no contacts,
negotiations or transactions that occurred in the past two years between Union
Pacific, Merger Subsidiary or, to the best knowledge of Union Pacific and
Merger Subsidiary, any of Union Pacific's or Merger Subsidiary's directors or
executive officers, on the one hand, and Motor Cargo or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
(c) NEGOTIATIONS OR CONTACTS. Except as described in the Prospectus, the
Schedule 14D-9 or elsewhere in this Statement, there have been no negotiations
or material contacts that occurred in the past two years concerning the matters
referred to in paragraph (b) of this Item between (i) any affiliates of Motor
Cargo or (ii) Motor Cargo or any of its affiliates and any person not
affiliated with Motor Cargo who would have a direct interest in such matters.
For more information about the past relationships between Union Pacific and
Merger Subsidiary, on the one hand, and Motor Cargo, on the other hand, please
read the information set forth under the captions "Background of the Offer" and
"The Offer--Relationships With Motor Cargo" in the Prospectus and in Item 3,
"Past Contacts, Transactions, Negotiations and Agreements," and Item 4, "The
Solicitation or Recommendation," in the Schedule 14D-9.
(d) [Intentionally omitted.]
(e) AGREEMENTS INVOLVING THE SUBJECT COMPANY'S SECURITIES. Except as set
forth in the Prospectus, the Schedule 14D-9 or elsewhere in this Statement,
neither Union Pacific or Merger Subsidiary nor, to the best knowledge of Union
Pacific and Merger Subsidiary, any of the persons listed in Annex A to the
Prospectus and Schedule I to this Statement has any agreement, arrangement, or
understanding with any other person with respect to any securities of Motor
Cargo, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies,
consents or authorizations.
23
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) [Intentionally omitted.]
(b) USE OF SECURITIES ACQUIRED. The Shares acquired in the Merger from the
Public Shareholders will be canceled.
(c) PLANS. It is currently expected that, following the consummation of
the Merger, Motor Cargo will be operated separately from Union Pacific's
trucking business, operated by its subsidiary Overnite Transportation Company,
and will maintain its own corporate identity. There are no plans to merge any
of the operating facilities or operating employees of Overnite and Motor Cargo,
but over time, there may be some efficiencies realized from combining
administrative functions. Union Pacific expects that Motor Cargo's current
chief executive officer will resign in the near future at which time Mr. Louis
Holdener, Motor Cargo's President and Chief Operating Officer, is expected to
assume the responsibilities of the Chief Executive Officer. Following
consummation of the Merger, the Shares will be delisted from the Nasdaq
National Market, the registration of the Shares will be terminated under
Section 12(g)(4) of the Exchange Act and Motor Cargo's obligations to file
reports under Section 15(d) of the Exchange Act will be terminated. For
additional information see "The Offer--Purpose of Our Offer; The Merger;
Dissenters' Rights" and "The Offer--Certain Effects of the Offer" in the
Prospectus and Item 4, "Terms of the Transaction" and "Special
Factors--Purposes, Alternatives, Reasons and Effects of the Merger--Effects" in
this Statement.
Except as otherwise described in the Prospectus, the Schedule 14D-9 or in
this Statement, Motor Cargo has not, and Union Pacific has not, as of the date
of this Statement, approved any specific plans or proposals for:
. any extraordinary corporate transaction involving Motor Cargo after the
completion of the Merger;
. any sale or transfer of a material amount of assets currently held by
Motor Cargo after the completion of the Merger;
. any change in the management of Motor Cargo; any material change in
Motor Cargo's dividend rate or policy, or indebtedness or
capitalization; or
. any other material change in Motor Cargo's corporate structure or
business.
Pursuant to the Merger Agreement, on November 30, 2001, Union Pacific
requested that Motor Cargo increase the size of the Board of Directors of Motor
Cargo to seven members from six members. Motor Cargo appointed five members
selected by Union Pacific to the Board of Directors of Motor Cargo following
the resignation of four members of the Board of Directors of Motor Cargo. The
directors selected by Union Pacific and appointed by Motor Cargo are: James R.
Young, Carl W. von Bernuth, Mary S. Jones, Joseph E. O'Connor, Jr. and James J.
Theisen, Jr. Except for Marvin L. Friedland and Louis V. Holdener, who have
continued as members of the Motor Cargo Board of Directors, all former members
of the Board of Directors of Motor Cargo have resigned. For more information
regarding these directors see Schedule I to this Statement.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER
See "Special Factors--Purposes, Alternatives, Reasons and Effects of the
Merger" and "Special Factors--Certain Federal Income Tax Consequences of the
Merger" above in this Statement.
ITEM 8. FAIRNESS OF THE TRANSACTION
See "Special Factors--Fairness of the Merger" above in this Statement.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
See "Special Factors--Reports, Opinions, Appraisals and Negotiations" above
in this Statement.
24
ITEM 10. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) SOURCE OF FUNDS. The total amount of funds required by Union Pacific
to pay the Merger Consideration to all Public Shareholders, and to pay related
fees and expenses, is estimated to be approximately $397,000. Union Pacific
expects to obtain the necessary funds from available cash and working capital.
(b) CONDITIONS. The obligations of Union Pacific, Merger Subsidiary and
Motor Cargo to effect the Merger are subject to the conditions that (i) no
order, statute, rule, regulation, executive order, stay, decree, judgment or
injunction has been enacted, entered, promulgated or enforced by any
governmental authority which prohibits or prevents the consummation of the
Merger and (ii) Motor Cargo will have performed and complied with, in all
material respects, all of its covenants and agreements required by the Merger
Agreement to be performed or complied with or satisfied by Motor Cargo at or
prior to the Effective Time.
(c) EXPENSES. The Paying Agent and the information agent, Morrow & Co.,
Inc., will receive reasonable and customary compensation for their services and
will be reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection with the
Merger, including certain liabilities under U.S. federal securities laws.
Union Pacific will not pay any fees or commissions to any broker or dealer
in connection with the Merger. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by Union Pacific for customary
mailing and handling expenses incurred by them in forwarding materials to their
customers.
The following is an estimate of fees and expenses to be incurred by Union
Pacific and Motor Cargo in connection with the Merger:
Legal........................... $100,000
Printing........................ 20,000
Filing.......................... 0
Paying Agent (including mailing) 7,500
Information Agent............... 1,000
Except for legal fees incurred by Motor Cargo, Motor Cargo will not pay any
of the fees and expenses set forth above.
(d) BORROWED FUNDS. Not applicable.
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) SECURITIES OWNERSHIP. At the Effective Time, immediately prior to the
Merger, Union Pacific is expected to be the owner of 6,801,327 Shares,
representing 99.7% of the outstanding Shares. Prior to the Effective Time Union
Pacific intends to contribute those Shares to Merger Subsidiary.
(b) SECURITIES TRANSACTIONS. Union Pacific acquired 6,801,327 Shares
pursuant to the Offer on November 30, 2001. See the Prospectus for additional
details regarding the Offer and Union Pacific's acquisition of Shares. Except
as set forth in the table below, none of Motor Cargo or Merger Subsidiary nor,
to the best knowledge of Union Pacific, Merger Subsidiary and Motor Cargo, any
of the persons listed on Schedule I to the Prospectus, Annex I to the Schedule
14D-9 and Schedule I to this Statement have engaged in any transactions in
Motor Cargo common stock in the past 60 days. The following table sets forth
transactions in Motor Cargo common stock in the past 60 days by the current and
former directors and officers of Motor Cargo.
25
Option Shares Shares Tendered
Sold at a Price of in the Offer for
Options Exercised on $13.30 on Union Pacific
Filing Person November 2, 2001 November 2, 2001 Common Stock
------------- -------------------- ------------------ ----------------
Harold R. Tate............ -- -- 3,858,000
Louis V. Holdener......... 40,000 40,000 15,640
Marvin L. Friedland....... 32,500 32,500 188,153
Lynn H. Wheeler........... 27,500 27,500 1,000
R. Scott Price............ 25,000 25,000 --
Matthew T. McClure........ 7,500 7,500 --
Steven E. Wynn............ 17,000 17,000 415
Kevin L. Avery............ 17,000 17,000 100
Robert Anderson........... 17,500 17,500 --
James Clayburn LaForce, Jr 17,500 17,500 2,000
Merlin J. Norton.......... 17,500 17,500 --
------- ------- ---------
Total.................. 219,000 219,000 207,308
======= ======= =========
ITEM 12. THE SOLICITATION OR RECOMMENDATION
Not applicable.
ITEM 13. FINANCIAL STATEMENTS
(a) FINANCIAL INFORMATION. The audited consolidated financial statements
of Motor Cargo as of and for the years ended December 31, 2000 and December 31,
1999 are incorporated herein by reference to the Consolidated Financial
Statements of Motor Cargo included in the Prospectus and in Motor Cargo's
Annual Report on Form 10-K for the year ended December 31, 2000 (the "Form
10-K"). The unaudited consolidated financial statements of Motor Cargo for the
three and nine-month periods ended September 30, 2001 and September 30, 2000
and as of September 30, 2001 are incorporated herein by reference to the
Prospectus and to Motor Cargo's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001 (the "Form 10-Q"). The historical per share data of
Motor Cargo for the nine months ended September 30, 2001 and for the year ended
December 30, 2000 are incorporated herein by reference to the section entitled
"Comparative Per Share Data" in the Prospectus.
Motor Cargo's Form 10-K and Form 10-Q are available for inspection and
copying at the Commission's public reference facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional office of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies may be obtained at prescribed rates from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission at http://www.sec.gov.
(b) PRO FORMA INFORMATION. Not applicable.
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
(a) SOLICITATIONS OR RECOMMENDATIONS. Except as set forth in the
Prospectus, the Schedule 14D-9 and elsewhere in this Statement there are no
persons or classes of persons who are directly or indirectly employed,
retained, or to be compensated to make solicitations or recommendations in
connection with the Merger.
(b) EMPLOYEES AND CORPORATE ASSETS. No employees or corporate assets of
Motor Cargo will be used by Union Pacific in connection with the Merger.
ITEM 15. ADDITIONAL INFORMATION
None.
26
ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
(a)(1) Letter from Union Pacific Corporation to Motor Cargo Shareholders.
(a)(2) Prospectus, dated November 29, 2001 (Commission File No. 333-72520). The
Prospectus is attached to this Statement as Annex A.
(c)(1) Opinion of Morgan Keegan & Company, Inc., dated October 15, 2001. The
Opinion is attached to this Statement as Annex II to the Schedule 14D-9 which is
attached to this Statement as Annex B.
(c)(2) Presentation of Morgan Keegan & Company, Inc., dated October 15, 2001.*
(c)(3) Presentation of Morgan Stanley & Co., dated October 10, 2001.*
(d)(1) Agreement and Plan of Merger, dated as of October 15, 2001, by and among
Motor Cargo Industries, Inc., Union Pacific Corporation and Motor Merger Co.
The Agreement and Plan of Merger is attached to this Statement as Annex C.
(d)(2) Shareholder Agreement, dated as of October 15, 2001, by and between Union
Pacific Corporation and Harold R. Tate is incorporated herein by reference to
Exhibit 99.2 to Union Pacific's Report on Form 8-K filed October 16, 2001.
(d)(3) Shareholder Agreement, dated as of October 15, 2001, by and between Union
Pacific Corporation and Marvin L. Friedland is incorporated herein by reference to
Exhibit 99.3 to Union Pacific's Report on Form 8-K filed October 16, 2001.
(f) Utah Revised Business Corporation Act Part 13. Part 13 is attached to this
Statement as Annex D.
(g) Motor Cargo Industries, Inc.'s Solicitation/Recommendation Statement on
Schedule 14D-9 dated October 31, 2001. The Schedule 14D-9 is attached to this
Statement as Annex B.
(h) Opinion of Skadden, Arps, Slate, Meagher & Flom as to certain tax matters is
incorporated herein by reference to Exhibit 8.1 to Amendment No.2 to Union
Pacific's Registration Statement on Form S-4 (SEC File No. 333-72520) filed on
November 26, 2001.
--------
* Previously filed as exhibits to the Transaction Statement on Schedule 13E-3
filed by Union Pacific Corporation, Motor Merger Co. and Motor Cargo
Industries, Inc. on December 11, 2001.
27
SCHEDULE I
MOTOR MERGER CO.
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Motor Merger Co. Except as noted, each of the executive
officers and directors named in the table below has held the indicated office
or position in his or her principal occupation for at least five years. Each
person listed below held the earliest indicated office or position as of at
least five years ago. Each person identified below is a United States citizen.
The principal business address of Motor Merger Co. and the business address of
each person identified below is 1416 Dodge Street, Omaha, Nebraska 68179.
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
James R. Young President and Director of Motor Merger Co. Present principal occupation:
Executive Vice President - Finance of Union Pacific Corporation and Chief
Financial Officer of Union Pacific Railroad, a wholly-owned subsidiary of
Union Pacific Corporation. Mr. Young was elected Executive Vice President -
Finance of Union Pacific Corporation and Chief Financial Officer of Union
Pacific Railroad effective December 1, 1999. Mr. Young was elected Controller
of Union Pacific Corporation and Senior Vice President - Finance of Union
Pacific Railroad effective March 1999 and Senior Vice President - Finance of
Union Pacific Corporation effective June 1998. Mr. Young served as Treasurer
of Union Pacific Railroad from June 1998 to March 1999. Mr. Young was Vice
President-Customer Service Planning and Quality of Union Pacific Railroad
from April 1998 to June 1998, Vice President - Quality and Operations Planning
from September 1997 to April 1998 and Vice President - Finance and Quality
from September 1995 to September 1997. Director of Motor Cargo Industries,
Inc. Age 49.
Carl W. von Bernuth Vice President and Secretary and Director of Motor Merger Co. Present
principal occupation: Senior Vice President, General Counsel and Secretary of
Union Pacific Corporation. Mr. von Bernuth was elected Corporate Secretary of
Union Pacific Corporation effective April 1997. Mr. von Bernuth has been
Senior Vice President and General Counsel of Union Pacific Corporation during
the past five years. Director of Motor Cargo Industries, Inc. Age 57.
Mary S. Jones Vice President and Treasurer and Director of Motor Merger Co. Present
principal occupation: Vice President and Treasurer of Union Pacific
Corporation. Ms. Jones was elected to her current position effective March 1999.
Ms. Jones served as Vice President -Investor Relations from June 1998 to March
1999. Ms. Jones was Assistant Vice President - Treasury and Assistant Treasurer
of Union Pacific Corporation from September 1996 to June 1998 and prior
thereto she was Assistant Treasurer of Union Pacific Corporation. Director of
Motor Cargo Industries, Inc. Age 49.
I-1
MOTOR CARGO INDUSTRIES, INC.
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Motor Cargo Industries, Inc. Except as noted, each of the
executive officers and directors named in the table below has held the
indicated office or position in his or her principal occupation for at least
five years. Each person listed below held the earliest indicated office or
position as of at least five years ago. Each person identified below is a
United States citizen. The principal business address of Motor Cargo
Industries, Inc. and, except as noted, the business address of each person
identified below is 845 West Center Street, North Salt Lake, Utah 84054.
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Harold R. Tate Mr. Tate served as Chief Executive Officer of Motor Cargo and its predecessors
from 1947 to March 1997, and was again elected as Motor Cargo's Chief
Executive Officer effective April 1, 2001. Mr. Tate also serves as a member of
the Board of Trustees of the Buffalo Bill Historical Center. Age 75.
Louis V. Holdener Mr. Holdener has been employed by Motor Cargo since 1965, and was named
President and Chief Operating Officer of Motor Cargo and appointed to the
Board of Directors of Motor Cargo effective April 1, 2001. Mr. Holdener has
also served as President of Motor Cargo's primary operating subsidiary since
1991, and served as Vice President of Motor Cargo from 1997 to 2001. Age 63.
Marvin L. Friedland Mr. Friedland has served as Vice President and General Counsel of Motor Cargo
and its predecessors since 1982. Mr. Friedland was appointed to the Board of
Directors of Motor Cargo in 1996. Age 59.
James R. Young Appointed to the Board of Director of Motor Cargo effective November 30,
2001. Present principal occupation: Executive Vice President - Finance of Union
Pacific Corporation and Chief Financial Officer of Union Pacific Railroad.
Mr. Young was elected Executive Vice President-Finance of Union Pacific
Corporation and Chief Financial Officer of Union Pacific Railroad effective
December 1, 1999. Mr. Young was elected Controller of Union Pacific
Corporation and Senior Vice President - Finance of Union Pacific Railroad
effective March 1999 and Senior Vice President - Finance of Union Pacific
Corporation effective June 1998. Mr. Young served as Treasurer of Union
Pacific Railroad from June 1998 to March 1999. Mr. Young was Vice President
- Customer Service Planning and Quality of Union Pacific Railroad from April
1998 to June 1998, Vice President - Quality and Operations Planning from
September 1997 to April 1998 and Vice President - Finance and Quality from
September 1995 to September 1997. President and Director of Motor Merger Co.
Age 49. Mr. Young's principal business address is 1416 Dodge Street, Omaha,
Nebraska 68179.
Carl W. von Bernuth Appointed to the Board of Director of Motor Cargo effective November 30,
2001. Present principal occupation: Senior Vice President, General Counsel and
Secretary of Union Pacific Corporation. Mr. von Bernuth was elected Corporate
Secretary effective April 1997. Mr. von Bernuth has been Senior Vice President
and General Counsel during the past five years. Secretary and Director of Motor
Merger Co. Age 57. Mr. von Bernuth's principal business address is 1416 Dodge
Street, Omaha, Nebraska 68179.
Mary S. Jones Appointed to the Board of Director of Motor Cargo effective November 30,
2001. Present principal occupation: Vice President and Treasurer of Union
Pacific Corporation. Ms. Jones was elected to her current position effective
March 1999. Ms. Jones served as Vice President - Investor Relations from June
1998 to March 1999. Ms. Jones was Assistant Vice President - Treasury and
Assistant Treasurer of Union Pacific Corporation from September 1996 to June
1998 and prior thereto she was Assistant Treasurer of Union Pacific Corporation.
Treasurer and Director of Motor Merger Co. Age 49. Ms. Jones' principal
business address is 1416 Dodge Street, Omaha, Nebraska 68179.
I-2
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Joseph E. O'Connor, Jr. Appointed to the Board of Director of Motor Cargo effective November 30,
2001. Present principal occupation: Vice President-Planning & Analysis for
Union Pacific Railroad Company in February 2000. Mr. O'Connor served as
Vice President - Bulk Products, Network Design & Integration for Union Pacific
Railroad Company from September 1998 to January 2000 and prior thereto he
was Vice President and Controller for Union Pacific Corporation. Age 44.
Mr. O'Connor's principal business address is 1416 Dodge Street, Omaha,
Nebraska 68179.
James J. Theisen, Jr. Appointed to the Board of Director of Motor Cargo effective November 30,
2001. Present principal occupation: Senior Corporate Counsel for Union Pacific
Corporation since June 1999. Mr. Theisen has served as Assistant Secretary of
Union Pacific Corporation since November 1999 and Assistant Secretary of
Union Pacific Railroad Company since May 2000. Mr. Theisen served as
General Attorney for Union Pacific Railroad Company from August 1997 to
May 1999 and prior thereto was Senior Corporate Attorney for Union Pacific
Corporation. Age 38. Mr. Theisen's principal business address is 1416 Dodge
Street, Omaha, Nebraska 68179.
I-3
ANNEX A
PROSPECTUS
A-1
Offer to Exchange Each Outstanding Share of Common Stock
of
Motor Cargo Industries, Inc.
for
0.26 of a Share of Common Stock
of
Union Pacific Corporation
or
$12.10 Net to the Seller in Cash
subject, in each case, to the election procedure described in this prospectus
and the related letter of election and transmittal.
The offer and withdrawal rights will expire at 12:00 midnight, New York City
time, on November 29, 2001, unless extended according to the terms of this
prospectus. Shares tendered pursuant to the offer may be withdrawn at any time
prior to the expiration of the offer, but not during any subsequent offering
period.
On October 15, 2001, we entered into an Agreement and Plan of Merger with
Motor Cargo Industries, Inc. Motor Cargo's board of directors has unanimously
approved and adopted the merger agreement, determined that the offer is
advisable and is fair to and in the best interests of the shareholders of Motor
Cargo and recommends that Motor Cargo shareholders accept the offer and tender
their shares pursuant to the offer.
We are offering to issue 0.26 of a share of Union Pacific Corporation common
stock, par value $2.50 per share, or to pay $12.10 in cash, for each
outstanding share of common stock, no par value, of Motor Cargo. Each Motor
Cargo shareholder will be able to elect to receive cash, shares of Union
Pacific common stock or a combination of both for his or her shares of Motor
Cargo common stock subject, in each case, to the election procedure described
in this prospectus and the related letter of election and transmittal.
The purpose of our offer is for Union Pacific to acquire control of, and
ultimately the entire common equity interest in, Motor Cargo. After completion
of the offer, we intend to complete a merger with Motor Cargo in which each
remaining outstanding share of Motor Cargo common stock would be converted into
the right to receive $12.10 in cash, subject to dissenters' rights available
under Utah law. If your shares are not exchanged in the offer, you will receive
the $12.10 in cash, without interest, pursuant to the merger, the receipt of
which may be delayed due to the possibility of a delay in completing the merger
after completion of the offer. Shareholders who do not tender their shares of
Motor Cargo common stock in the offer will not have a right to receive Union
Pacific common stock in the merger.
Our obligation to exchange Union Pacific common stock and cash for Motor
Cargo common stock is subject to the conditions listed under "The
Offer--Conditions of Our Offer." Union Pacific common stock is listed on the
New York Stock Exchange under the symbol "UNP" and Motor Cargo common stock is
listed on the Nasdaq National Market under the symbol "CRGO." You are urged to
obtain current market quotations for the shares of Union Pacific common stock
and Motor Cargo common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under
this prospectus or determined if this prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
See "RISK FACTORS" beginning on page 14 for a discussion of certain factors
that you should consider in connection with the offer.
We are not asking you for a proxy and you are requested not to send us a
proxy. Any solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
The date of this prospectus is November 29, 2001
ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Union Pacific Corporation and Motor Cargo Industries, Inc. from documents
filed with the Securities and Exchange Commission that have not been included
in or delivered with this document. This information is available at the
Internet web site which the Securities and Exchange Commission maintains at
http://www.sec.gov, as well as from other sources. See "Where You Can Find More
Information" on page 82.
You also may request copies of these documents from us, without charge, upon
written or oral request to our information agent, Morrow & Co., Inc., 445 Park
Avenue, 5/th/ Floor, New York, New York 10022, collect at (212) 754-8000 or
toll-free at (800) 654-2468 if you represent a bank or a brokerage firm or
(800) 607-0888 if you are a shareholder. In order to receive timely delivery of
the documents, you must have made your requests no later than November 22, 2001.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION............................................... 1
SUMMARY............................................................................................ 4
Information About Union Pacific and Motor Cargo................................................. 4
Reasons for the Offer........................................................................... 4
The Offer....................................................................................... 4
Election Procedure.............................................................................. 6
The Merger...................................................................................... 6
Shareholder Agreements.......................................................................... 6
Dissenters' Rights.............................................................................. 6
Material United States Federal Income Tax Consequences.......................................... 7
Union Pacific Will Account for the Merger Using the Purchase Method............................. 7
Comparative Per Share Market Price Information.................................................. 7
UNION PACIFIC SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA...................................... 8
MOTOR CARGO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA........................................ 9
COMPARATIVE PER SHARE DATA......................................................................... 11
COMPARATIVE STOCK PRICES AND DIVIDENDS............................................................. 12
Union Pacific Dividend Policy................................................................... 13
RISK FACTORS....................................................................................... 14
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS......................................... 16
REASONS FOR THE OFFER.............................................................................. 17
Reasons for the Recommendation of Union Pacific's Board of Directors; Factors Considered........ 17
Reasons for the Recommendation of Motor Cargo's Board of Directors; Factors Considered.......... 17
BACKGROUND OF THE OFFER............................................................................ 20
THE OFFER.......................................................................................... 22
Timing of Our Offer............................................................................. 22
Extension, Termination and Amendment............................................................ 22
Procedure for Tendering and Electing............................................................ 23
Withdrawal Rights and Change of Election........................................................ 26
Exchange of Shares of Motor Cargo Common Stock; Delivery of Union Pacific Common Stock and Cash. 27
Cash Instead of Fractional Shares of Union Pacific Common Stock................................. 28
Material United States Federal Income Tax Consequences.......................................... 28
Purpose of Our Offer; The Merger; Dissenters' Rights............................................ 30
Conditions of Our Offer......................................................................... 31
State Takeover Laws and Regulatory Approvals.................................................... 34
Certain Effects of the Offer.................................................................... 36
Source and Amount of Funds...................................................................... 37
Relationships With Motor Cargo.................................................................. 37
Accounting Treatment............................................................................ 37
Fees and Expenses............................................................................... 37
Stock Exchange Listing.......................................................................... 38
CERTAIN PROJECTIONS (UNAUDITED).................................................................... 39
THE MERGER AGREEMENT............................................................................... 41
The Offer....................................................................................... 41
The Merger...................................................................................... 41
Motor Cargo Board of Directors.................................................................. 42
Treatment of Motor Cargo Stock Options.......................................................... 43
Representations and Warranties.................................................................. 43
Covenants....................................................................................... 45
Additional Agreements........................................................................... 50
Conditions of the Offer......................................................................... 51
i
Page
----
Conditions to the Merger................................................................ 51
Termination of the Merger Agreement..................................................... 51
Termination Fees........................................................................ 53
Amendments and Waiver................................................................... 53
SHAREHOLDER AGREEMENTS..................................................................... 54
Tender of Shares of Motor Cargo Common Stock............................................ 54
Voting Agreement and Proxy.............................................................. 54
Representations and Warranties.......................................................... 55
Covenants............................................................................... 55
Termination............................................................................. 56
Restrictions Imposed by Margin Accounts................................................. 56
INTERESTS OF CERTAIN PERSONS............................................................... 57
INFORMATION ABOUT UNION PACIFIC............................................................ 58
Union Pacific........................................................................... 58
Additional Information.................................................................. 58
INFORMATION ABOUT MOTOR CARGO.............................................................. 59
Motor Cargo............................................................................. 59
MOTOR CARGO'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................................... 60
Introduction............................................................................ 60
Results Of Operations................................................................... 60
Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000. 60
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000... 61
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999................... 63
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998................... 64
Liquidity and Capital Resources......................................................... 64
Inflation............................................................................... 65
Seasonality............................................................................. 65
Motor Cargo's Cautionary Statement for Forward-Looking Statements....................... 65
Additional Information.................................................................. 66
DESCRIPTION OF UNION PACIFIC CAPITAL STOCK................................................. 67
General................................................................................. 67
Transactions With Ten Percent Shareholders.............................................. 67
Common Stock............................................................................ 67
Preferred Stock......................................................................... 68
COMPARISON OF SHAREHOLDER RIGHTS........................................................... 72
LEGAL MATTERS.............................................................................. 82
EXPERTS.................................................................................... 82
WHERE YOU CAN FIND MORE INFORMATION........................................................ 82
INDEX TO MOTOR CARGO FINANCIAL STATEMENTS.................................................. F-1
ANNEX
ANNEX A--DIRECTORS AND EXECUTIVE OFFICERS OF UNION PACIFIC CORPORATION..................... A-1
ii
QUESTIONS AND ANSWERS ABOUT THE PROPOSED ACQUISITION
Q: What are Union Pacific and Motor Cargo proposing?
A: We have entered into a merger agreement with Motor Cargo pursuant to which
we are offering to exchange shares of Union Pacific common stock or cash as
described in the next answered question for each outstanding share of Motor
Cargo common stock. After the completion of the offer, Motor Cargo will merge
with and into Motor Merger Co., a wholly-owned subsidiary of Union Pacific,
which we refer to as Merger Subsidiary in this prospectus, or Merger Subsidiary
will merge with and into Motor Cargo, depending on certain tax matters. As a
result of the offer and the merger, the operations of Motor Cargo will be owned
by a wholly-owned subsidiary of Union Pacific.
Q: What will I receive in exchange for my shares of Motor Cargo common stock?
A: We are offering to exchange 0.26 of a share of Union Pacific common stock,
$12.10 in cash or a combination of both for your shares of Motor Cargo common
stock that are validly tendered in and not properly withdrawn from the offer
subject, in each case, to the election procedure described in this prospectus
and the related letter of election and transmittal. Each share of Motor Cargo
common stock which has not been exchanged or accepted for exchange in the offer
will be converted into the right to receive $12.10 in cash.
If you elect to receive Union Pacific common stock in the offer, you will not
receive any fractional shares of Union Pacific common stock in the offer.
Instead, you will receive cash in an amount equal to the market value of any
fractional shares you would otherwise have been entitled to receive.
The market value of the Union Pacific common stock will depend upon, and is
expected to fluctuate with, among other things, the performance of Union
Pacific, conditions (economic or otherwise) affecting the rail transportation
and trucking industries, interest rates, market conditions and other factors
that generally influence the prices of securities. Moreover, it is likely that
at or after the time Motor Cargo common stock is accepted for exchange in the
offer the market value of the Union Pacific common stock and the cash
consideration to be received in the offer will not be equal. If the share price
of Union Pacific common stock is less than or equal to $46.53, the stock
consideration received by Motor Cargo shareholders will be worth less than the
$12.10 per share paid to shareholders who elect to receive the cash
consideration. If your shares are not exchanged in the offer, you will receive
the $12.10 in cash, without interest, pursuant to the merger, the receipt of
which may be delayed due to the possibility of a delay in completing the merger
after the completion of the offer, including possible delay due to disclosure
requirements associated with the merger.
Q: Will I receive dividends on my shares of Union Pacific common stock after
the offer?
A: Union Pacific currently pays quarterly dividends of $0.20 per share on its
common stock and expects to continue this policy after the offer. However,
future dividends will depend on Union Pacific's results of operations,
financial condition, cash requirements, future prospects and other factors.
Those of you who tender your shares of Motor Cargo common stock and elect to
receive shares of Union Pacific common stock will be eligible to receive the
fourth quarter dividend if your shares are accepted in the offer prior to the
record date, which is December 12, 2001. There can be no assurance, however,
that the offer will be completed by such date. For a further discussion of
dividends, see "Union Pacific Dividend Policy" on page 13.
Q: Where do shares of Union Pacific common stock trade?
A: Union Pacific common stock is listed and traded on the New York Stock
Exchange under the symbol "UNP."
Q: How long will it take to complete the offer and the merger?
A: We hope to complete the offer by November 29, 2001, the initial scheduled
expiration date. We expect to complete the merger shortly after we complete the
offer.
The term "expiration date" means 12:00 midnight, New York City time, on
November 29, 2001, unless we extend the period of time for which the offer is
open, in which case the term "expiration date" means the latest time and date
on which the offer, as so extended, expires.
Q: Will I have to pay any fees or commissions?
A: If you are the record owner of your shares and you tender your shares
directly to the exchange
1
agent, you will not have to pay brokerage fees or incur similar expenses. If
you own your shares through a broker or other nominee, and your broker tenders
the shares on your behalf, your broker may charge you a fee for doing so. You
should consult your broker or nominee to determine whether any charges will
apply.
Q: Does Motor Cargo support the offer and the merger?
A: Yes. Motor Cargo's board of directors has unanimously determined that the
offer is advisable and is fair to, and in the best interests of, Motor Cargo
shareholders and recommends that Motor Cargo shareholders accept the offer and
tender their shares pursuant to the offer. Motor Cargo's board of directors has
unanimously approved and adopted the merger agreement, the offer and the
merger. Information about the recommendation of Motor Cargo's board of
directors is more fully set forth in Motor Cargo's Solicitation/Recommendation
Statement on Schedule 14D-9, which was mailed to Motor Cargo shareholders with
the preliminary prospectus.
Q: Has Motor Cargo received a fairness opinion in connection with the offer and
the merger?
A: Yes. Motor Cargo has received an opinion from Morgan Keegan & Company, Inc.
dated October 15, 2001 to the effect that, as of such date and based upon the
assumptions, limitations and qualifications in the opinion, the consideration
to be received by shareholders of Motor Cargo pursuant to the offer and the
merger is fair to those shareholders from a financial point of view. The full
text of the opinion, which sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is
attached as Annex II to Motor Cargo's Schedule 14D-9, which was mailed to the
Motor Cargo shareholders with the preliminary prospectus.
Q: Have any Motor Cargo shareholders agreed to tender their shares?
A: Yes. Harold R. Tate and Marvin L. Friedland, both shareholders of Motor
Cargo, who collectively own approximately 59.3% of the outstanding shares of
Motor Cargo common stock on a fully diluted basis, have agreed, as of October
15, 2001, to tender their shares in the offer. In addition, Mr. Tate has agreed
to elect to receive shares of Union Pacific common stock in the offer. Subject
to certain exceptions, Mr. Friedland has also agreed to elect to receive shares
of Union Pacific common stock.
Q: What percentage of Union Pacific common stock will Motor Cargo shareholders
own after the offer?
A: If we obtain all of the shares of Motor Cargo pursuant to the offer and all
Motor Cargo shareholders elect to receive Union Pacific common stock, former
shareholders of Motor Cargo would own less than 1% of the outstanding shares of
Union Pacific common stock, based upon the number of shares of Union Pacific
common stock and Motor Cargo common stock outstanding on October 15, 2001.
Q: What are the conditions to the offer?
A: The offer is subject to several conditions, including:
. two-thirds of the outstanding shares of Motor Cargo common stock, on a
fully-diluted basis, having been tendered and not properly withdrawn;
. waiting periods under applicable antitrust laws having expired or been
terminated;
. the board of directors of Motor Cargo not having modified its
recommendation of the offer and the merger, approved or recommended an
acquisition proposal from a third party or entered into any agreement
relating to an acquisition proposal;
. the registration statement of which this prospectus is a part having been
declared effective by the SEC;
. the shares of Union Pacific common stock to be issued in the offer and the
merger having been approved for listing on the New York Stock Exchange,
subject to official notice of issuance;
. Motor Cargo not having breached any covenant, representation or warranty
in a material manner; and
. there not having occurred any event that has had or could reasonably be
expected to have a material adverse effect on Motor Cargo and its
subsidiaries, taken as a whole.
2
These conditions and other conditions to the offer are discussed in this
prospectus under "The Offer--Conditions of Our Offer" beginning on page 31.
Q: How do I participate in your offer?
A: To tender your shares, you should do the following:
. if you hold shares in your own name, complete and sign the enclosed letter
of election and transmittal and return it with your share certificates to
Wells Fargo Bank Minnesota, N.A., the exchange agent for the offer, at the
appropriate address specified on the back cover page of this prospectus
before the expiration date of the offer; or
. if you hold your shares in "street name" through a broker, instruct your
broker as to your election and to tender your shares before the expiration
date.
For more information on the timing of the offer, extensions of the offer period
and your rights to withdraw your shares from the offer before the expiration
date, please refer to "The Offer" beginning on page 22.
Q: How do I make my election?
A: You may elect to receive cash, shares of Union Pacific common stock or a
combination of cash and stock in the offer by indicating your preference on the
letter of election and transmittal. If you fail to properly make an election,
you will be deemed to have elected to receive cash and will receive $12.10 for
each share of Motor Cargo common stock you tender for exchange. If you decide
to change your election after you have tendered your shares of Motor Cargo
common stock you must first withdraw your tendered shares and then retender
your shares with a new letter of election and transmittal which indicates your
revised election.
Q: When and how can I withdraw tendered shares?
Your tender of shares of Motor Cargo common stock pursuant to the offer is
irrevocable, except that shares of Motor Cargo common stock tendered pursuant
to the offer may be withdrawn at any time prior to the expiration date and,
unless we previously accepted them pursuant to the offer, may also be withdrawn
at any time after December 29, 2001.
Q: Am I entitled to dissenters' rights?
A: In connection with the offer, Motor Cargo shareholders do not have
dissenter's rights. Under Utah law, however, Motor Cargo shareholders who
choose not to tender their shares in the offer may exercise dissenters' rights
in connection with the merger.
Q: Do the statements which appeared on the cover page of the preliminary
prospectus regarding the preliminary prospectus being subject to change and the
registration statement filed with the Securities and Exchange Commission not
yet being effective mean that the offer had not commenced?
A: No. Completion of the preliminary prospectus and effectiveness of the
registration statement were not necessary for the offer to commence. We could
not, however, accept for exchange any shares tendered in the offer until the
registration statement was declared effective by the Securities and Exchange
Commission and the other conditions to our offer have been satisfied or waived.
The offer commenced when we mailed the preliminary prospectus and the related
letter of election and transmittal to Motor Cargo shareholders. The
registration statement was declared effective by the Securities and Exchange
Commission on November 29, 2001.
Q: Is Union Pacific's financial condition relevant to my decision to tender my
shares in the offer?
A: Yes. If you elect to receive Union Pacific common stock, your shares of
Motor Cargo common stock accepted in the offer will be exchanged for shares of
Union Pacific common stock and so you should consider our financial condition
before you decide to become one of our shareholders through the offer. In
considering Union Pacific's financial condition, you should review the
documents incorporated by reference in this prospectus because they contain
detailed business, financial and other information about us.
Q: Where can I find out more information about Union Pacific and Motor Cargo?
A: You can find out information about Union Pacific and Motor Cargo from
various sources described under "Additional Information" on the page preceding
the table of contents and "Where You Can Find More Information" on page 82.
Q: Who can I call with questions about the offer?
A: You can contact our information agent, Morrow & Co., Inc., collect at (212)
754-8000 or toll-free at (800) 654-2468 if you represent a bank or brokerage
firm, or (800) 607-0888 if you are a shareholder.
3
SUMMARY
This brief summary does not contain all of the information that may be
important to you. You should carefully read this entire document and the
documents which we have filed with the Securities and Exchange Commission,
which we often refer to as the "SEC" in this prospectus. For information on how
to obtain the documents that we have filed with the SEC, see "Additional
Information" on the page preceding the table of contents and "Where You Can
Find More Information" on page 82.
Information About Union Pacific and Motor Cargo (See pages 58 and 59)
Union Pacific Corporation
1416 Dodge Street
Omaha, Nebraska 68179
(402) 271-5777
Union Pacific Corporation was incorporated in Utah in 1969. Union Pacific
operates primarily in the areas of rail transportation, through its subsidiary
Union Pacific Railroad Company, and trucking, through its subsidiary Overnite
Transportation Company.
Motor Cargo Industries, Inc.
845 West Center Street
North Salt Lake, Utah 84054
(801) 936-1111
Motor Cargo is a regional less-than-truckload (LTL) carrier that provides
transportation and logistics services to shippers within the western United
States, including Arizona, California, Colorado, Idaho, Nevada, New Mexico,
Oregon, Texas, Utah and Washington. Motor Cargo transports general commodities,
including consumer goods, packaged foodstuffs, electronics, computer equipment,
apparel, hardware, industrial goods and auto parts for a diversified customer
base. Motor Cargo offers a broad range of services, including expedited
scheduling and full temperature-controlled service. Through its wholly-owned
subsidiary, MC Distribution Services, Inc., Motor Cargo also provides
customized logistics, warehousing and distribution management services.
Reasons for the Offer (See page 17)
We believe that our acquisition of Motor Cargo represents a compelling
opportunity to enhance value for both Motor Cargo and Union Pacific
shareholders. The Union Pacific and the Motor Cargo boards of directors have
separately approved the offer, the merger and the merger agreement after
careful consideration. For a list of the factors considered by each board of
directors in making its determination, please see "Reasons for the Offer."
The Offer (See page 22)
Summary of the Offer
We are offering, upon the terms and subject to the election procedure
described in this prospectus and the related letter of election and
transmittal, to exchange 0.26 of a share of Union Pacific common stock or
$12.10 in cash for each outstanding share of Motor Cargo common stock that is
validly tendered on or prior to the expiration date and not properly withdrawn.
The term "expiration date" means 12:00 midnight, New York City time, on
November 29, 2001 unless we extend the period of time for which this offer is
open, in which case the term "expiration date" means the latest time and date
on which the offer, as so extended, expires.
Conditions of Our Offer
Our obligation to exchange shares of our common stock or cash for shares of
Motor Cargo common stock pursuant to the offer is subject to several conditions
referred to under "The Offer--Conditions of Our Offer," including conditions
that would require a minimum number of shares of Motor Cargo common stock to be
tendered, receipt of all required regulatory approvals and satisfaction of
other conditions. As of October 26, 2001, there were 6,473,140 shares of Motor
Cargo common stock outstanding.
Timing of the Offer
Our offer is currently scheduled to expire on November 29, 2001; however, we
currently intend to extend our offer from time to time as necessary until all
the conditions to the offer have been satisfied or waived. See "The
Offer--Extension, Termination and Amendment."
4
Extension, Termination and Amendment
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to
extend the period of time during which our offer remains open, and we can do so
by giving oral or written notice of such extension to the exchange agent. If we
decide to extend our offer, we will make a public announcement to that effect
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. We are not making any assurance that we
will exercise our right to extend our offer, although we currently intend to do
so until all conditions have been satisfied or waived. During any such
extension, all shares of Motor Cargo common stock previously tendered and not
properly withdrawn will remain subject to the offer, subject to your right to
withdraw your shares of Motor Cargo common stock.
Subject to the SEC's applicable rules and regulations and the terms of our
merger agreement, we also reserve the right, in our sole discretion, at any
time or from time to time, (a) to delay our acceptance for exchange or our
exchange of any shares of Motor Cargo common stock pursuant to our offer,
regardless of whether we previously accepted shares of Motor Cargo common stock
for exchange, or to terminate our offer and not accept for exchange or exchange
any shares of Motor Cargo common stock not previously accepted for exchange or
exchanged, upon the failure of any of the conditions of the offer to be
satisfied and (b) to waive any condition or otherwise to amend the offer in any
respect, by giving oral or written notice of such delay, termination or
amendment to the exchange agent and by making a public announcement. We will
follow any extension, termination, amendment or delay, as promptly as
practicable, with a public announcement. In the case of an extension, any such
announcement will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Securities
Exchange Act of 1934, which require that any material change in the information
published, sent or given to the shareholders in connection with the offer be
promptly sent to shareholders in a manner reasonably designed to inform
shareholders of such change) and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
Exchange of Shares; Delivery of Union Pacific Common Stock and Cash
Upon the terms and subject to the conditions of our offer (including, if the
offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for exchange, and will exchange, shares validly
tendered and not properly withdrawn as promptly as practicable after the
expiration date and promptly after they are tendered during any subsequent
offering period. The exchange agent will deliver, or cause to be delivered,
cash and shares of Union Pacific common stock in exchange for shares of Motor
Cargo common stock pursuant to the offer and cash in lieu of fractional shares
of Union Pacific common stock as soon as practicable after it receives notice
of our acceptance of the validly tendered shares.
Withdrawal Rights
Your tender of shares of Motor Cargo common stock pursuant to the offer is
irrevocable, except that shares of Motor Cargo common stock tendered pursuant
to the offer may be withdrawn at any time prior to the expiration date and,
unless we previously accepted them pursuant to the offer, may also be withdrawn
at any time after December 29, 2001.
Subsequent Offering Period
We may elect to provide a subsequent offering period of 3 to 20 business
days after the acceptance of shares of Motor Cargo common stock pursuant to the
offer if the requirements under Rule 14d-11 of the Exchange Act have been met.
You will not have the right to withdraw shares of Motor Cargo common stock that
you tender in the subsequent offering period, if any.
Procedure for Tendering Shares
For you to validly tender shares of Motor Cargo common stock pursuant to our
offer, (a) a properly completed and duly executed letter of election and
transmittal (or manually executed facsimile of that
5
document), along with any required signature guarantees, or an agent's message,
which is explained below, in connection with a book-entry transfer, and any
other required documents, must be transmitted to and received by the exchange
agent at one of its addresses set forth on the back cover of this prospectus,
and certificates for tendered shares of Motor Cargo common stock must be
received by the exchange agent at such address, or those shares of Motor Cargo
common stock must be tendered pursuant to the procedures for book-entry tender
set forth in "The Offer" (and a confirmation of receipt of such tender
received), in each case before the expiration date, or (b) you must comply with
the guaranteed delivery procedures set forth in "The Offer--Procedure for
Tendering and Electing--Guaranteed Delivery."
Election Procedure (See page 23)
You may elect to receive cash, shares of Union Pacific common stock or a
combination of cash and stock by indicating your preference on the letter of
election and transmittal. If you fail to properly make an election, you will be
deemed to have elected to receive cash and will receive $12.10 for each share
of Motor Cargo common stock you tender for exchange. If you decide to change
your election after you have tendered your shares of Motor Cargo common stock
you must first withdraw your tendered shares and then tender your shares again
with a new letter of election and transmittal which indicates your revised
election.
The Merger (See page 41)
We intend, promptly after completion of the offer, to seek to merge Motor
Cargo with and into Merger Subsidiary, or to merge Merger Subsidiary with and
into Motor Cargo, depending on certain tax matters. Upon completion of the
merger, each share of Motor Cargo common stock which has not been exchanged or
accepted for exchange in the offer would be converted into the right to receive
$12.10 in cash, the same amount of cash as is paid in the offer. Shareholders
who do not tender their shares of Motor Cargo common stock in the offer will
not have a right to receive Union Pacific common stock in the merger.
If at the end of the offer, we have received between two-thirds and 90% of
the outstanding shares of Motor Cargo common stock, we will effect a long-form
merger as permitted under Utah law, or if we have received 90% or more of the
outstanding shares of Motor Cargo common stock, we will effect a short-form
merger as permitted under Utah law without having a vote of Motor Cargo
shareholders.
If the share price of Union Pacific common stock exceeds $46.53 per share
and, therefore, the consideration received by Motor Cargo shareholders who
elect to receive stock in the offer exceeds the $12.10 per share in cash to be
received in the merger, the merger will be a "going-private" transaction within
the meaning of Rule 13e-3 under the Exchange Act. As a result, additional
information relating to the negotiations, the fairness of the consideration to
be received in the merger, and related matters must be filed on Schedule 13E-3
with the SEC. An information statement required by Rule 13e-3, containing such
information, must be provided to the Motor Cargo shareholders at least 20 days
before the merger is effective. In such event, the consummation of the merger
will be delayed.
Shareholder Agreements (See page 54)
Harold R. Tate and Marvin L. Friedland, both shareholders of Motor Cargo,
who collectively own approximately 59.3% of the outstanding shares of Motor
Cargo common stock on a fully diluted basis, have agreed, as of October 15,
2001, to tender their shares in the offer. In addition, Mr. Tate has agreed to
elect to receive shares of Union Pacific common stock in the offer. Subject to
certain exceptions, Mr. Friedland has also agreed to elect to receive shares of
Union Pacific common stock.
Dissenters' Rights (See page 30)
The offer does not entitle you to dissenters' rights with respect to your
shares of Motor Cargo common stock.
If you do not tender your shares of Motor Cargo common stock during the
offer you will have the right under Utah law to dissent and demand appraisal of
the fair value of your shares of Motor Cargo common stock, but only if you
comply with certain statutory requirements. In the event of a long-form or
short-form merger, information regarding these requirements will be provided to
you if you have not tendered your shares of Motor Cargo common stock.
6
Material United States Federal Income Tax Consequences (See page 28)
In general, if you exchange all of your shares of Motor Cargo common stock
for shares of Union Pacific common stock in the offer, you will not recognize
any gain or loss except with respect to cash received in lieu of a fractional
share of Union Pacific common stock. If you exchange all of your shares of
Motor Cargo common stock for cash in the offer and/or the merger, you will
recognize gain or loss measured by the difference between the amount of cash
received with respect to each share of Motor Cargo common stock and your tax
basis in each such share. If you exchange some of your shares of Motor Cargo
common stock for shares of Union Pacific common stock in the offer and you
exchange some of your shares of Motor Cargo common stock for cash in the offer
and/or the merger, you will recognize gain (but not loss) equal to the lesser
of (1) the amount of cash you received in the offer and/or the merger and (2)
an amount equal to the excess, if any, of (a) the sum of the amount of cash you
received in the offer and/or the merger and the fair market value of the Union
Pacific common stock you received in the offer over (b) the tax basis of your
Motor Cargo common stock.
The tax consequences described in the preceding paragraph assume that Motor
Cargo will be merged with and into Merger Subsidiary, which is the "forward
merger." If certain conditions relating to the United States federal income tax
treatment of the offer and the forward merger are not met, then Merger
Subsidiary may, at Union Pacific's reasonable discretion, be merged with and
into Motor Cargo, which would be a "reverse merger." In this case, instead of
the tax consequences described in the preceding paragraph, you will recognize
all of your gain or loss on the disposition of your shares in the offer and/or
the reverse merger, regardless of whether you elect to exchange your shares of
Motor Cargo common stock for shares of Union Pacific common stock or cash.
We encourage you to consult your own tax advisor about the effect the offer
and the merger will have on you. See "The Offer--Material United States Federal
Income Tax Consequences."
Union Pacific Will Account for the Merger Using the Purchase Method (See page
37)
Union Pacific will account for the merger as a purchase for financial
reporting purposes.
Comparative Per Share Market Price Information (See page 12)
Union Pacific common stock is listed on the New York Stock Exchange under
the symbol "UNP." Motor Cargo common stock trades on the Nasdaq National Market
under the symbol "CRGO."
Set forth below are the closing stock prices of Union Pacific common stock
on the New York Stock Exchange Composite Transactions Tape and Motor Cargo
common stock on the Nasdaq National Market on October 15, 2001, the last full
trading day before the public announcement of the merger agreement, and on
November 28, 2001, the last full trading day before the date of this prospectus.
Union Pacific Motor Cargo
Common Stock Common Stock
------------- ------------
October 15, 2001. $48.02 $ 9.95
November 28, 2001 $54.55 $14.20
Shareholders are urged to obtain current market quotations for the Union
Pacific and Motor Cargo common stock.
7
UNION PACIFIC SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected financial data for each of the five years in the
period ended December 31, 2000 have been derived from Union Pacific's audited
consolidated financial statements. Union Pacific's consolidated financial
statements as of December 31, 2000 and 1999 and for the three years ended
December 31, 2000 and Deloitte & Touche LLP's audit report with respect thereto
have been incorporated by reference into this prospectus. The financial data as
of September 30, 2001 and 2000, and for each of the nine-month periods then
ended, have been derived from Union Pacific's unaudited consolidated financial
statements which include, in management's opinion, all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the results of
operations and financial position of Union Pacific for the periods and dates
presented. This data should be read in conjunction with the respective audited
and unaudited consolidated financial statements of Union Pacific, including the
notes to the financial statements, incorporated by reference into this document.
For the Nine
Months Ended
September 30, For the Year Ended December 31,(a)
----------------- --------------------------------------------
2001 2000 2000(b) 1999 1998(c) 1997 1996
------- ------- ------- ------- ------- ------- -------
(Millions of Dollars, Except Per Share Amounts and as Indicated)
For the Period
Operating Revenue................. $ 8,967 $ 8,926 $11,878 $11,237 $10,514 $11,079 $ 8,786
Operating Income (Loss)........... 1,507 1,564 1,903 1,804 (171) 1,144 1,432
Income (Loss) (d)................. 691 685 842 783 (633) 432 733
Net Income (Loss)................. 691 685 842 810 (633) 432 904
Per Share--Basic:
Income (Loss) (d).............. 2.79 2.78 3.42 3.17 (2.57) 1.76 3.38
Net Income (Loss).............. 2.79 2.78 3.42 3.28 (2.57) 1.76 4.17
Per Share--Diluted:
Income (Loss) (d).............. 2.71 2.71 3.34 3.12 (2.57) 1.74 3.36
Net Income (Loss).............. 2.71 2.71 3.34 3.22 (2.57) 1.74 4.14
Dividends Per Share............... 0.60 0.60 0.80 0.80 0.80 1.72 1.72
Operating Cash Flow............... 1,362 1,497 1,958 1,869 565 1,600 1,657
------- ------- ------- ------- ------- ------- -------
At Period End
Total Assets...................... $31,305 $30,391 $30,499 $29,888 $29,374 $28,860 $27,990
Total Debt........................ 8,404 8,524 8,351 8,640 8,692 8,518 8,027
Common Shareholders' Equity....... 9,257 8,552 8,662 8,001 7,393 8,225 8,225
------- ------- ------- ------- ------- ------- -------
Additional Data
Average Employees................. 60,600 62,150 61,800 64,200 65,100 65,600 54,800
Revenues Per Employee (000)....... $147.97 $143.62 $ 192.2 $ 175.0 $ 161.5 $ 168.9 $ 160.3
Equity Per Common Share........... 37.27 34.50 35.09 32.29 29.88 33.30 33.35
Rail Commodity Revenue............ 7,773 7,714 10,270 9,851 9,072 9,712 7,419
Trucking Revenue.................. 862 839 1,113 1,062 1,034 946 961
Rail Carloads (000)............... 6,664 6,680 8,901 8,556 7,998 8,453 6,632
Trucking Shipments (000).......... 5,936 5,683 7,495 7,708 7,789 7,506 8,223
Rail Operating Ratio (%).......... 81.9 81.1 82.3 82.0 95.4 87.4 79.1
Trucking Operating Ratio (%) (e).. 95.1 95.6 95.2 98.1 94.8 96.8 104.9
------- ------- ------- ------- ------- ------- -------
Financial Ratios
Debt to Capital Employed.......... 43.9% 45.9% 45.1% 47.6% 49.4% 50.9% 49.4%
Return on Equity (f).............. 7.7% 8.3% 10.1% 10.5% (8.1)% 5.3% 12.4%
--------
(a)Data included the effects of the acquisitions of Southern Pacific Rail
Corporation as of October 1, 1996, and reflects the disposition of Union
Pacific's natural resources subsidiary in 1996 and Skyway Freight Systems,
Inc. in 1998.
(b)2000 operating income and net income included $115 million pre-tax ($72
million after-tax) work force reduction charge.
(c)1998 operating loss and net loss included a $547 million pre- and after-tax
charge for the revaluation of Overnite goodwill.
(d)Based on results from continuing operations.
(e)Excluded Overnite goodwill amortization in all years, and the revaluation of
Overnite goodwill in 1998.
(f)Based on average common shareholders' equity.
8
MOTOR CARGO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected financial data for each of the five years in the
period ended December 31, 2000 have been derived from Motor Cargo's
consolidated financial statements, which have been audited by Grant Thornton
LLP, independent public accountants. The financial data as of September 30,
2001 and 2000, and for each of the nine-month periods then ended, have been
derived from Motor Cargo's unaudited consolidated financial statements which
include, in management's opinion, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the results of operations
and financial position of Motor Cargo for the periods and dates presented. This
data should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Motor Cargo, including the notes to the
financial statements, which can be found in "Index to Motor Cargo Financial
Statements" beginning on page F-1.
Nine months
Ended September 30, Year ended December 31,
------------------ -----------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- ------- -------- -------- -------- -------- -------
(in thousands, except per share amounts)
Statement of Earnings Data
Operating revenues.................................. $103,745 $96,254 $131,112 $125,310 $114,725 $105,381 $92,310
Operating expenses
Salaries, wages and benefits..................... 53,312 47,894 65,166 59,502 51,747 45,247 39,666
Operating supplies and expenses.................. 16,569 15,748 21,812 20,342 15,974 15,706 14,947
Purchased transportation......................... 8,732 8,849 11,870 15,580 17,974 15,389 14,164
Operating taxes and licenses..................... 3,887 3,743 5,048 4,731 3,885 3,519 3,531
Insurance and claims............................. 2,951 2,608 3,381 3,826 3,651 4,478 2,785
Depreciation and amortization.................... 6,633 6,641 8,772 8,822 7,928 6,998 6,578
Communications and utilities..................... 1,582 1,601 2,176 2,023 1,924 1,896 1,784
Building rents................................... 2,314 2,607 3,423 3,043 2,365 1,745 1,540
Loss (gain) on sale of equipment................. 5 (152) (206) (241) (103) (142) 71
Other non-recurring expense...................... -- 102 -- -- -- -- --
-------- ------- -------- -------- -------- -------- -------
Total operating expenses...................... 95,985 89,641 121,442 117,628 105,345 94,836 85,066
-------- ------- -------- -------- -------- -------- -------
Operating income.............................. 7,760 6,613 9,670 7,682 9,380 10,545 7,244
Other income (expense)
Interest expense................................. (91) (121) (158) (139) (154) (1,051) (1,430)
Other, net....................................... 114 97 988 110 223 79 39
-------- ------- -------- -------- -------- -------- -------
Earnings before income taxes........................ 7,783 6,589 10,500 7,653 9,449 9,573 5,853
Income taxes........................................ 3,138 2,567 4,080 3,000 3,660 3,805 2,118
-------- ------- -------- -------- -------- -------- -------
Net earnings........................................ 4,645 $ 4,022 $ 6,420 $ 4,653 $ 5,789 $ 5,768 $ 3,735
======== ======= ======== ======== ======== ======== =======
Earnings per common share--basic.................... $ 0.72 $ 0.59 $ 0.95 $ 0.67 $ 0.83
Earnings per common share--diluted.................. 0.71 0.59 0.95 0.67 0.83
Weighted-average shares outstanding--diluted........ 6,517 6,799 6,739 6,941 6,992
Pro forma (1)
Earnings before income taxes..................... $ 9,573 $ 5,853
Income taxes..................................... 3,952 2,256
-------- -------
Net earnings..................................... $ 5,621 $ 3,597
======== =======
Earnings per common share--basic................. $ 0.95 $ 0.63
======== =======
Weighted-average shares outstanding--basic....... 5,939 5,820
======== =======
Earnings per common share--diluted............... $ 0.95 $ 0.62
======== =======
Weighted-average shares outstanding--diluted..... 5,939 5,820
======== =======
--------
(1) Effective August 28, 1997, Motor Cargo acquired the membership interests of
Ute, a Utah limited liability company. A limited liability company passes
through to its members essentially all taxable earnings and losses and pays
no tax at the company level. Accordingly, for comparative purposes, a pro
forma provision for income taxes using an effective income tax rate of
approximately 38% has been determined assuming Ute had been taxed as a C
corporation for all periods presented.
9
September 30, December 31,
--------------- ---------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(in thousands of dollars)
Balance Sheet Data
Current assets.................................. $28,104 $25,738 $29,642 $27,090 $26,775 $26,965 $23,197
Current liabilities............................. 15,462 12,095 12,327 11,641 10,741 11,597 15,752
Total assets.................................... 86,221 79,827 85,365 80,570 72,660 68,069 63,834
Long-term obligations, less current maturities.. 1,065 4,190 8,015 8,021 5,390 6,492 16,820
Total liabilities............................... 24,049 23,549 27,864 26,929 23,386 24,618 37,794
Shareholders' equity............................ 62,172 56,278 57,501 53,641 49,275 43,451 26,040
10
COMPARATIVE PER SHARE DATA
The following table sets forth selected historical and pro forma per share
data for Union Pacific and historical and pro forma equivalent per share data
for Motor Cargo. The data presented below should be read in conjunction with
the historical audited and unaudited financial statements of Motor Cargo and
Union Pacific that have been incorporated by reference into or included in this
document. The Motor Cargo pro forma equivalent per share data was calculated by
multiplying the Union Pacific pro forma per share data by an exchange ratio of
0.26. The pro forma combined per share data may not be indicative of the
operating results or financial position that would have occurred if the merger
had been consummated at the beginning of the periods indicated, and may not be
indicative of future operating results or financial position.
For the
Nine Months For the
Ended Year Ended
September 30, December 31,
2001 2000
------------- ------------
Union Pacific--Historical
Net income per share:
Diluted....................... $ 2.71 $ 3.34
Basic......................... 2.79 3.42
Cash dividends declared per share. 0.60 0.80
Book value per share.............. 37.27 35.09
Motor Cargo--Historical
Net income per share:
Diluted....................... $ 0.71 $ 0.95
Basic......................... 0.72 0.95
Cash dividends declared per share. -- --
Book value per share.............. 9.60 8.88
Union Pacific--Pro Forma
Net income per share:
Diluted....................... $ 2.71 $ 3.34
Basic......................... 2.79 3.42
Cash dividends declared per share. 0.60* 0.80*
Book value per share.............. 37.32 35.15
Motor Cargo--Pro Forma Equivalent
Net income per share:
Diluted....................... $ 0.70 $ 0.87
Basic......................... 0.73 0.89
Cash dividends declared per share. 0.16 0.21
Book value per share.............. 9.70 9.14
--------
* Pro forma cash dividends declared per share assumes consistent rate
maintained for additional shares issued in the offer.
11
COMPARATIVE STOCK PRICES AND DIVIDENDS
Union Pacific common stock is listed and traded on the NYSE under the symbol
"UNP." Motor Cargo common stock trades on the Nasdaq National Market under the
symbol "CRGO."
The following table sets forth, for the periods indicated, the high and low
sales prices per share of Union Pacific common stock as reported on the NYSE
Composite Transaction Tape, and the quarterly cash dividends per share declared
with respect thereto, and the high and low sales prices per share of Motor
Cargo common stock as reported on the Nasdaq National Market. Motor Cargo has
never declared or paid any cash dividends on its capital stock.
Motor Cargo
Union Pacific Common Stock Common Stock
-------------------------- ------------
Market Price Cash Market Price
--------------- Dividends ------------
High Low Declared High Low
------ ------ --------- ------ -----
1999
First Quarter.............................. $55.00 $44.63 $0.20 $ 8.50 $4.00
Second Quarter............................. 67.88 50.88 0.20 8.91 5.00
Third Quarter.............................. 60.69 46.94 0.20 8.50 6.13
Fourth Quarter............................. 56.50 39.00 0.20 7.19 3.38
2000
First Quarter.............................. $47.63 $34.25 $0.20 $ 5.38 $4.00
Second Quarter............................. 46.31 37.13 0.20 6.00 4.25
Third Quarter.............................. 46.00 37.44 0.20 6.13 4.50
Fourth Quarter............................. 52.81 37.88 0.20 7.61 5.00
2001
First Quarter.............................. $57.09 $48.81 $0.20 $ 9.75 $5.75
Second Quarter............................. 60.70 50.00 0.20 10.00 7.00
Third Quarter.............................. 58.23 43.39 0.20 9.75 6.56
Fourth Quarter (through November 28, 2001). 56.00 44.60 -- (a) 14.50 9.30
--------
(a) The board of directors of Union Pacific declared a dividend of $0.20 per
share of Union Pacific common stock for holders of record as of December
12, 2001 at Union Pacific's board of directors meeting held on November 15,
2001.
The following table sets forth the closing prices per share of Union Pacific
common stock on the NYSE and Motor Cargo common stock on the Nasdaq National
Market on:
. October 15, 2001, the last full trading day prior to the announcement of
the execution of the merger agreement; and
. November 28, 2001, the last full trading day prior to the date of this
prospectus.
Union Pacific Motor Cargo
Common Stock Common Stock
------------- ------------
October 15, 2001.................. $48.02 $ 9.95
November 28, 2001................. $54.55 $14.20
Motor Cargo shareholders should obtain current market quotations for Union
Pacific common stock and Motor Cargo common stock. The market price of Union
Pacific common stock could vary at any time before or after the offer and the
merger. Because the exchange ratio in the offer is fixed, the value of the
shares of Union Pacific common stock to be received by Motor Cargo shareholders
who elect to receive stock may, depending on the price of the Union Pacific
common stock, be more or less than the $12.10 per share of Motor Cargo common
12
stock to be received by Motor Cargo shareholders who tender and elect to
receive cash. If the share price of Union Pacific common stock is less than or
equal to $46.53, the consideration received by Motor Cargo shareholders who
elect to receive stock will be worth less than the $12.10 per share received by
Motor Cargo shareholders who elect to receive cash. If the share price of Union
Pacific common stock is more than $46.53, the consideration received by Motor
Cargo shareholders who tender and elect to receive stock will be worth more
than the $12.10 per share received by Motor Cargo shareholders who elect to
receive cash. As a result, the market price of Motor Cargo common stock could
vary considerably before completion of the offer and could be higher or lower
than the $12.10 per share. If your shares are not exchanged in the offer, you
will receive the $12.10 in cash, without interest, pursuant to the merger, the
receipt of which may be delayed due to the possibility of a delay in completing
the merger after completion of the offer, including possible delay due to
disclosure requirements associated with the merger. Motor Cargo shareholders
will not be able to receive Union Pacific common stock in the merger.
Union Pacific Dividend Policy
The holders of Union Pacific common stock receive dividends if and when
declared by the Union Pacific board of directors out of funds legally available
therefor. Union Pacific currently pays quarterly dividends of $0.20 per share
on its common stock and expects to continue this policy after the completion of
the offer. The board of directors of Union Pacific declared a dividend of $0.20
per share of Union Pacific common stock for holders of record as of December
12, 2001 at Union Pacific's board of directors meeting held on November 15,
2001. However, Union Pacific cannot be certain that its dividend policy will
remain unchanged after completion of the offer. The declaration and payment of
dividends after the completion of the offer will depend upon business
conditions, operating results, capital and reserve requirements and the Union
Pacific board of directors' consideration of other relevant factors.
13
RISK FACTORS
In addition to the other information included in this prospectus (including
the matters addressed in "Cautionary Statement Concerning Forward-Looking
Statements" on page 16), you should consider the following in determining
whether to tender your shares of Motor Cargo common stock and the consideration
that you elect.
The Trading Price of Union Pacific Common Stock May Be Affected by Factors
Different from Those Affecting the Trading Price of Motor Cargo Common Stock
Upon completion of our offer, holders of Motor Cargo common stock that
elected to receive Union Pacific common stock will become holders of Union
Pacific common stock. Union Pacific's business differs from that of Motor
Cargo, and Union Pacific's results of operations, as well as the trading price
of Union Pacific common stock, may be affected by factors different from those
affecting Motor Cargo's results of operations and the price of Motor Cargo
common stock.
We Face Competition from Other Types of Transportation and from Other Rail
Operators
We compete directly with other modes of transportation, including motor
carriers and, to a lesser extent, ships, barges and pipelines. Competition is
based primarily upon the rate charged and the transit time required, as well as
the quality and reliability of the service provided. While we must build or
acquire and maintain our rail system, trucks and barges are able to use public
rights-of-way maintained by public entities. Any future improvements or
expenditures materially increasing the quality of these alternative modes of
transportation in the locations in which we operate, or legislation granting
materially greater latitude for motor carriers with respect to size or weight
limitations, could have a material adverse effect on our results of operations
and financial condition.
We Are Subject to Significant Governmental Regulation of Our Railroad
Operations
We are subject to governmental regulation by a significant number of
federal, state and local regulatory authorities with respect to our railroad
operations and a variety of health, safety, labor, environmental and other
matters. Our failure to comply with applicable laws and regulations could have
a material adverse effect on us. Governments may change the legislative
framework within which we operate without providing us with any recourse for
any adverse effects that the change may have on our business. Also, some of the
regulations require us to obtain and maintain various licenses, permits and
other authorizations and we cannot assure you that we will continue to be able
to do so.
We Are Subject to Significant Environmental Laws and Regulations
Our operations are subject to extensive federal, state and local
environmental laws and regulations concerning, among other things, emissions to
the air, discharges to waters, and the handling, storage, transportation and
disposal of waste and other materials and cleanup of hazardous material or
petroleum releases. Environmental liability can extend to previously owned or
operated properties, leased properties and properties owned by third parties,
as well as to properties currently owned and used by us. Environmental
liabilities may also arise from claims asserted by adjacent landowners or other
third parties in toxic tort litigation. We may be subject to allegations or
findings to the effect that we have violated, or are strictly liable under,
these laws or regulations. We could incur significant costs as a result of any
of the foregoing and we may be required to incur significant expenses to
investigate and remediate environmental contamination.
Rising Fuel Costs Could Materially Adversely Affect Our Business
Fuel costs constitute a significant portion of our transportation expenses.
Diesel fuel prices are subject to dramatic increases. Such increases may have a
material adverse effect on our business and results of operations. Fuel prices
and supplies are influenced significantly by international political and
economic circumstances. If a fuel supply shortage were to arise from OPEC
production curtailments, a disruption of oil imports or otherwise, higher fuel
prices and any price increases would materially affect our operating results.
14
Some of Our Employees Belong to Labor Unions and Strikes or Work Stoppages
Could Adversely Affect Our Operations
We are a party to collective bargaining agreements with various labor unions
in the United States. Some of these agreements expire within the next two
years. Disputes with regard to the terms of these agreements or our potential
inability to negotiate acceptable contracts with these unions could result in,
among other things, strikes, work stoppages or other slowdowns by the affected
workers. If the unionized workers were to engage in a strike, work stoppage or
other slowdown, or other employees were to become unionized or the terms and
conditions in future labor agreements were renegotiated, we could experience a
significant disruption of our operations and higher ongoing labor costs.
If the Internal Revenue Service Successfully Challenged the Treatment of the
Offer and the Forward Merger as a Reorganization or if the Merger Were
Effected as a Reverse Merger, the Transaction Would Be Fully Taxable for You
If the merger is effected as a forward merger of Motor Cargo with and into
Merger Subsidiary, no assurance can be given that the Internal Revenue Service
would not challenge the treatment of the offer and the forward merger as an
integrated transaction that constitutes a "reorganization" for United States
federal income tax purposes. Moreover, if certain conditions relating to the
United States federal income tax treatment of the offer and the proposed
forward merger are not met, then at Union Pacific's reasonable discretion, the
merger may be effected as a reverse merger of Merger Subsidiary with and into
Motor Cargo. If the IRS successfully challenged the treatment of the offer and
the forward merger as a "reorganization" or if the merger were effected as a
reverse merger, you would recognize all of your gain or loss on the disposition
of your shares in the offer and/or the merger. We encourage you to consult your
own tax advisor about the effect the offer and the merger will have on you. See
"The Offer--Material United States Federal Income Tax Consequences" on page 28.
Terrorist Attacks, Such as the Attacks That Occurred in New York,
Pennsylvania and Washington, D.C. on September 11, 2001, and Future War or
Risk of War May Adversely Impact Our Results of Operations, Our Ability to
Raise Capital or Our Future Growth
The impact that the terrorist attacks of September 11, 2001 may have on our
industry in general, and on us in particular, is not known at this time.
Uncertainty surrounding retaliatory military strikes or a sustained military
campaign may impact our operations in unpredictable ways, including disruptions
of our rail lines, highways, facilities, fuel supplies and the possibility that
our rail lines and facilities could be direct targets of, or indirect
casualties of, an act of terror. In addition, war or risk of war may also have
an adverse effect on the economy. A decline in economic activity could
adversely affect our revenues or restrict our future growth. Instability in the
financial markets as a result of terrorism or war could also affect our ability
to raise capital. These attacks will likely lead to increased volatility in
fuel cost and availability and could affect the results of our operations. In
addition, the insurance premiums charged for some or all of the coverages
currently maintained by us could increase dramatically, or the coverages could
be unavailable in the future.
15
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are, and statements in other
material filed or to be filed with the SEC (as well as information included in
oral statements or other written statements made or to be made by Union
Pacific) are, or will be, forward-looking within the meaning of the Securities
Act of 1933 and the Exchange Act. The safe harbors provided under the
Securities Act of 1933 and the Exchange Act with respect to forward-looking
statements are not available to statements made in connection with a tender
offer. These forward-looking statements include, without limitation, statements
relating to the cost savings expected to result from the proposed acquisition,
anticipated results of operations of the combined company following the
proposed acquisition, projected earnings per share of the combined company
following the proposed acquisition and the restructuring charges estimated to
be incurred in connection with the proposed acquisition. Generally, the words
"will," "may," "should," "continue," "believes," "expects," "intends,"
"anticipates" or similar expressions identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the
times at, or by which, such performance or results will be achieved.
Forward-looking information is based on information available at the time
and/or management's good faith belief with respect to future events, and is
subject to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in the statements.
You should understand that the following important factors, in addition to
those discussed in "Risk Factors" previously and in the documents which are
incorporated by reference, could affect the future results of Union Pacific,
Motor Cargo and the combined company following the completion of the merger,
and could cause those results or other outcomes to differ materially from those
expressed or implied in the forward-looking statements:
. cost savings expected to result from the proposed acquisition may not be
fully realized or realized within the expected time-frame;
. operating results following the proposed acquisition may be lower than
expected;
. competitive pressure among companies in our industry may increase
significantly;
. whether Union Pacific and its subsidiaries are fully successful in
implementing their financial and operational initiatives;
. industry competition, conditions, performance and consolidation;
. legislative and/or regulatory developments, including possible enactment
of initiatives to re-regulate the rail business;
. natural events such as severe weather, floods and earthquakes;
. the effects of adverse general economic conditions, both within the United
States and globally;
. changes in fuel prices;
. changes in labor costs;
. global and domestic economic repercussions from recent terrorist
activities and the government response thereto;
. labor stoppages; and
. the outcome of claims and litigation.
Forward-looking statements speak only as of the date the statement was made.
Union Pacific assumes no obligation to update forward-looking information to
reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information. If Union Pacific does update one or more
forward-looking statements, no inference should be drawn that Union Pacific
will make additional updates with respect thereto or with respect to other
forward-looking statements.
16
REASONS FOR THE OFFER
Reasons for the Recommendation of Union Pacific's Board of Directors; Factors
Considered
In approving the merger agreement, the offer, the merger and the other
transactions contemplated by the merger agreement, Union Pacific's board of
directors considered a number of factors, including:
. the review of the business, operations, financial condition, earnings and
prospects of Union Pacific, Overnite and Motor Cargo, conducted by the
respective managements of Union Pacific and Overnite, which was analyzed
by the management of Union Pacific in its consideration of Union Pacific's
strategic objectives;
. the potential synergies that may be achieved through cross-marketing each
company's transportation services to the other company's customers;
. the complementary nature of Overnite's and Motor Cargo's businesses;
. the strategic fit between Overnite and Motor Cargo, and the belief that
the acquisition of Motor Cargo has the potential to enhance shareholder
value through additional opportunities;
. the belief of Union Pacific's board of directors that the terms of the
transaction are reasonable;
. the competitive conditions in the trucking industries, including the
likelihood of consolidation and increased competition; and
. the likely impact of the merger on each company's employees and customers.
The foregoing discussion of the information and factors considered by the
Union Pacific board of directors is not intended to be exhaustive, but includes
the material factors considered by the Union Pacific board of directors. In
view of the variety of factors considered in connection with its evaluation of
the transaction, the Union Pacific board of directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination and
recommendation. In addition, individual directors may have given differing
weights to different factors.
Reasons for the Recommendation of Motor Cargo's Board of Directors; Factors
Considered
Motor Cargo's board of directors, by unanimous vote, has approved and
adopted the merger agreement and the transactions contemplated by it, including
the offer and the merger, and has determined that the offer and the merger are
advisable and fair to and in the best interests of the shareholders of Motor
Cargo and recommends that the shareholders of Motor Cargo accept the offer and
tender their shares of Motor Cargo common stock pursuant to the offer. In
reaching their decision as to whether to tender for cash or shares of Union
Pacific common stock, shareholders should consider their personal financial
situation and consult their financial, accounting and tax advisors.
In making the determination and recommendation described above, Motor
Cargo's board of directors considered a number of factors, including those
described below:
. current industry, economic and market conditions, including recent
business combination transactions by other carriers;
. the Motor Cargo board of directors' familiarity with the business,
financial condition, prospects and current business strategy of Motor
Cargo; in this regard, the Motor Cargo board of directors particularly
considered:
--the historical results, financial condition, results of operations, cash
flows, earnings, and assets of Motor Cargo;
--Motor Cargo's future prospects; and
--the current near-term and long-term outlook for the less-than-truckload,
or LTL, market;
17
. Motor Cargo's business, strategic objectives and prospects if it did not
pursue the transaction, and the risks and uncertainties associated
therewith, including risks associated with increased competition with
larger companies;
. the fact that Motor Cargo shareholders would be able to elect to receive
either $12.10 in cash or, alternatively, 0.26 of a share of Union Pacific
common stock for each share of Motor Cargo common stock;
. the fact that both the cash consideration of $12.10 and the value of Union
Pacific stock based upon an exchange ratio of 0.26 of a share represented
a substantial premium over the average trading price of Motor Cargo common
stock over the past year;
. the fact that Union Pacific stock is highly liquid, has a current
quarterly dividend of $0.20 per share and would provide shareholders
electing to receive Union Pacific common stock with an opportunity to
participate in the growth potential of Union Pacific;
. the strategic fit between Motor Cargo and Union Pacific's existing
trucking operations;
. the Motor Cargo board of directors' review of public disclosures about the
business, financial condition, prospects and current business strategy of
Union Pacific, the due diligence review by Motor Cargo's management and
financial and legal advisors of Union Pacific and Union Pacific's recent
historical stock price performance;
. Morgan Keegan's analyses presented to Motor Cargo's board of directors and
Morgan Keegan's opinion that, based upon the assumptions, limitations and
qualifications in the opinion, the consideration to be received by
shareholders of Motor Cargo pursuant to the offer and the merger is fair
to those shareholders from a financial point of view;
. the expected ability to consummate the offer and the merger as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"), which would allow shareholders electing to receive shares of
Union Pacific common stock for their shares of Motor Cargo common stock to
defer income tax liability until such shares of Union Pacific common stock
are sold;
. the fact that the offer and the merger provide for a prompt exchange offer
for all shares of Motor Cargo common stock to be followed by a second-step
merger at the same cash consideration per share, thereby enabling Motor
Cargo's shareholders to obtain the benefits of the transaction at the
earliest possible time;
. the fact that preliminary contacts with other potential buyers did not
yield an offer superior to the terms of the merger agreement;
. the belief, based in part upon the analyses of Morgan Keegan and the
opinion of senior management, that it was unlikely that a third party
would propose a transaction superior to the Union Pacific transaction;
. the terms of the merger agreement, which, subject to certain conditions,
allow Motor Cargo to terminate the merger agreement upon payment of a $5
million termination fee if a superior proposal to acquire Motor Cargo is
made;
. the significant likelihood that the transactions contemplated by the
merger agreement and the offer will be consummated, particularly in light
of Union Pacific's reputation, ability to finance the transaction, lack of
any financing condition in the merger agreement, the ability to terminate
the offer and the merger agreement only in limited circumstances and the
likely satisfaction of the conditions to the offer, including the
condition that holders tender two-thirds of the outstanding shares of
Motor Cargo common stock and the regulatory approval requirements; and
. the fact that Harold R. Tate, Motor Cargo's majority shareholder, was in
favor of the transaction and willing to enter into a shareholder agreement
providing for the exchange of all of his shares of Motor Cargo common
stock for shares of Union Pacific common stock.
In view of the wide variety of factors considered by Motor Cargo's board of
directors in connection with its evaluation of the offer and the complexity of
such matters, Motor Cargo's board of directors did not consider it
18
practical to, nor did it attempt to, quantify, rank or otherwise assign
relative weights to the specific factors it considered in reaching its
decision. In addition, Motor Cargo's board of directors did not undertake to
determine specifically whether any particular factor (or any aspect of any
particular factor) was favorable or unfavorable to its ultimate determination,
but rather conducted a discussion of the factors described above, including
asking questions of Motor Cargo's management and legal and financial advisors,
and reached a general consensus that the offer is advisable and fair to and in
the best interests of the shareholders of Motor Cargo. In considering the
factors described above, individual members of Motor Cargo's board of directors
may have given different weight to different factors.
A summary of Morgan Keegan's report and opinion including the analyses
performed, the bases and methods of arriving at such opinion and a description
of Morgan Keegan's investigation and assumptions are disclosed in Item 4 of
Motor Cargo's Solicitation/Recommendation Statement on Schedule 14D-9, which
was mailed to the shareholders of Motor Cargo with the preliminary prospectus
and is incorporated by reference into this prospectus. Morgan Keegan's opinion
is attached as Annex II to Motor Cargo's Schedule 14D-9 and is incorporated by
reference into this prospectus.
To Motor Cargo's knowledge, after reasonable inquiry, all of its executive
officers, directors and their affiliates currently intend to tender all shares
of Motor Cargo common stock that are held of record or are beneficially owned
by them pursuant to the offer, other than the shares of Motor Cargo common
stock, if any, held by such persons that, if tendered, could cause them to
incur liability under Section 16(b) of the Exchange Act. Prior to the
completion of the offer, executive officers and directors have indicated they
may exercise options to purchase in the aggregate up to 229,000 shares of Motor
Cargo common stock and sell the underlying shares in brokerage transactions.
Mr. Tate, Chairman of the Board and Chief Executive Officer of Motor Cargo, and
Mr. Friedland, Vice President and General Counsel of Motor Cargo, have entered
into shareholder agreements with Union Pacific, pursuant to which they have
agreed to tender all of their shares of Motor Cargo common stock in the offer.
Mr. Tate and, subject to certain exceptions, Mr. Freidland have agreed to elect
to receive only Union Pacific common stock for their shares of Motor Cargo
common stock.
19
BACKGROUND OF THE OFFER
As a result of its customary review of the business and the marketplace and
in connection with the development of its strategic plans during 2000 and 2001,
Overnite identified a need to expand its operations in the western region of
the United States to complement its current business. Overnite considered and
analyzed the acquisition of several entities and identified Motor Cargo as a
viable candidate during the middle of 2000. Morgan Stanley & Co., Incorporated
provided financial advice and assistance to Union Pacific and Overnite in
connection with the evaluation of the potential transaction.
In response to recent consolidations in the trucking industry, Motor Cargo
considered available options to bolster its competitive position, including the
possibility of entering into a business combination. On January 16, 2001, Motor
Cargo engaged Morgan Keegan to serve as its financial advisor. Representatives
of Motor Cargo had preliminary discussions with two potential acquirors but
concluded that neither company was prepared to make an offer to acquire Motor
Cargo on acceptable terms.
In February 2001, Marshall L. Tate, who was at the time the Chief Executive
Officer of Motor Cargo, was contacted by John Terry, a shareholder of Motor
Cargo and a consultant to Overnite. Mr. Terry and Mr. Marshall Tate discussed
whether Motor Cargo would be interested in a potential acquisition transaction
with Overnite.
On February 22, 2001, Patrick D. Hanley, Senior Vice President and Chief
Financial Officer of Overnite, made a presentation to the board of directors of
Union Pacific regarding the potential acquisition of Motor Cargo, and the board
of directors authorized Overnite to continue exploring the potential
acquisition of Motor Cargo. Thereafter, Overnite contacted Morgan Keegan to
discuss the terms of a confidentiality agreement and arrange a meeting between
Harold R. Tate, Chairman of Motor Cargo, and Leo H. Suggs, Chairman and Chief
Executive Officer of Overnite.
On March 1, 2001, Mr. Marshall Tate and Mr. Harold Tate each received a
telephone call from Mr. Suggs, confirming Overnite's interest in a potential
transaction.
On March 7, 2001, Overnite entered into a confidentiality agreement with
Morgan Keegan, on behalf of Motor Cargo. Pursuant to the terms of the
confidentiality agreement, Motor Cargo furnished Overnite with information in
connection with its evaluation of a possible transaction with Motor Cargo.
On March 16, 2001, following Overnite's review of the information provided
by Motor Cargo, Mr. Suggs, Mr. Hanley and Mr. Terry met with Mr. Harold Tate
and representatives of Morgan Keegan in Phoenix, Arizona for preliminary
discussions regarding whether a transaction could be completed on terms
acceptable to both parties.
As a result of the meeting, Motor Cargo agreed to allow Overnite to proceed
with its due diligence investigation of Motor Cargo by teleconference and by
conducting investigations in Salt Lake City, Utah. During the remainder of
March, Overnite conducted its due diligence activities and, on March 31, 2001,
Richard K. Davidson, Chairman, President and Chief Executive Officer of Union
Pacific, authorized Mr. Suggs to pursue a possible business combination
transaction with Motor Cargo.
On April 2, 2001, Mr. Suggs, Mr. Hanley and Mr. Terry met with Mr. Harold
Tate and representatives of Morgan Keegan at the offices of Motor Cargo in
North Salt Lake, Utah and indicated that Overnite was potentially interested in
acquiring all of the outstanding common stock of Motor Cargo at a value of
$10.25 per share. After further discussions, the parties determined that
further negotiations would not be likely to produce definitive terms for an
acquisition that would be acceptable to both parties.
20
In a letter to Overnite, dated April 5, 2001, Motor Cargo's legal counsel
requested that all confidential information be returned to Morgan Keegan or
destroyed in accordance with the terms of the confidentiality agreement. In a
letter dated April 6, 2001, Mr. Suggs confirmed the termination of Overnite's
interest in a business combination transaction with Motor Cargo.
On April 9, 2001, the board of directors of Motor Cargo met and concluded
that the terms of the proposed transaction were inadequate.
Between the latter part of April 2001 and September 2001, Mr. Suggs and Mr.
Harold Tate occasionally discussed the operations of their respective
companies, and Overnite continued to follow the financial performance of Motor
Cargo. In addition, Morgan Keegan was frequently in contact with
representatives of Overnite regarding a possible acquisition by Union Pacific
of Motor Cargo.
During the latter part of August and September 2001, Mr. Suggs and Mr.
Harold Tate arranged a meeting between Mr. Harold Tate and Mr. Davidson in
North Salt Lake, Utah for purposes of determining whether negotiation of an
acquisition could resume. On September 5, 2001, Mr. Suggs and Mr. Hanley met
with Mr. Davidson and James R. Young, Executive Vice President-Finance and
Chief Financial Officer of Union Pacific, in Omaha, Nebraska, and Mr. Davidson
authorized Mr. Suggs to attempt to initiate negotiations with Mr. Harold Tate.
On September 6, 2001, Mr. Suggs and Mr. Davidson visited Motor Cargo's
facilities in North Salt Lake, Utah and discussed with Mr. Harold Tate a
possible acquisition of Motor Cargo by Union Pacific, although no negotiations
took place at this time.
On September 26, 2001, Mr. Suggs visited Motor Cargo's headquarters and made
a new proposal for the possible acquisition of Motor Cargo by Union Pacific.
Motor Cargo's management reviewed the proposal with Morgan Keegan and Motor
Cargo's legal counsel and proposed a modification to the proposal later that
day. The proposed modification increased the minimum exchange ratio applicable
to the exchange of shares of Motor Cargo common stock for shares of Union
Pacific common stock. At a meeting of the board of directors of Union Pacific
held on September 27, 2001, a possible acquisition was considered and approved
subject to, among other things, approval of the transaction by the Motor Cargo
board of directors and negotiation of terms, representations, warranties and
conditions to be set forth in a definitive acquisition agreement satisfactory
to the management of Union Pacific and Overnite. On September 28, 2001, Mr.
Suggs confirmed to Motor Cargo that Union Pacific was interested in pursuing a
possible acquisition of Motor Cargo.
During the next two weeks, legal counsel for both parties negotiated the
terms and conditions of a merger agreement. Union Pacific and Mr. Harold Tate
and Mr. Marvin L. Friedland also negotiated the terms and conditions of the
shareholder agreements relating to the exchange of shares by Mr. Harold Tate
and Mr. Friedland, the execution of which was a condition to Union Pacific's
proceeding with the transaction with Motor Cargo. During this two week period,
representatives of Overnite and Union Pacific conducted further due diligence
by teleconference and by investigations in Salt Lake City, Utah.
On October 15, 2001, the board of directors of Motor Cargo held a special
meeting at which Motor Cargo's management and legal and financial advisors
reviewed the terms of the merger agreement and the shareholder agreements with
the members of the board of directors. Morgan Keegan made a presentation to the
Motor Cargo board of directors, including a discussion of analyses used in
evaluating the proposed transaction. During the meeting, Morgan Keegan provided
its opinion that the consideration to be received by shareholders of Motor
Cargo pursuant to the offer and the merger is fair to those shareholders from a
financial point of view, which opinion was subsequently confirmed by Morgan
Keegan in writing. After full consideration and discussion, the Motor Cargo
board of directors unanimously approved and adopted the merger agreement,
including the offer and the merger.
Following the meeting of the Motor Cargo board of directors, the appropriate
parties signed the merger agreement and the shareholder agreements and the
parties issued a joint press release announcing the transaction.
On October 31, 2001, Union Pacific and Motor Cargo issued a joint press
release announcing the commencement of the offer for all of the outstanding
shares of Motor Cargo common stock.
21
THE OFFER
We are offering to exchange either 0.26 of a share of Union Pacific common
stock or $12.10 in cash for each outstanding share of Motor Cargo common stock,
validly tendered and not properly withdrawn, subject, in each case, to the
election procedure described in this prospectus and the related letter of
election and transmittal.
You should understand that if the Union Pacific common stock price is less
than or equal to $46.53 and you elect to receive Union Pacific common stock
then you will receive shares of Union Pacific common stock having a value of
less than $12.10 for each share of Motor Cargo common stock validly tendered
and not properly withdrawn.
You will not receive any fractional shares of Union Pacific common stock.
Instead, you will receive cash in an amount equal to the market value of any
fractional shares you would otherwise have been entitled to receive.
If you are the record owner of your shares and you tender your shares
directly to the exchange agent, you will not be obligated to pay any charges or
expenses of the exchange agent or any brokerage commissions. If you own your
shares through a broker or other nominee and your broker or nominee tenders the
shares on your behalf, your broker or nominee may charge you a fee for doing
so. You should consult your broker or nominee to determine whether any charges
will apply. Except as set forth in the instructions to the letter of election
and transmittal and the merger agreement, transfer taxes on the exchange of
Motor Cargo common stock pursuant to our offer will be paid by us or on our
behalf.
We are making this offer in order to acquire all of the outstanding shares
of Motor Cargo common stock. We intend, as soon as possible after completion of
the offer, to have Merger Subsidiary merge with Motor Cargo. The purpose of the
merger is to acquire all shares of Motor Cargo common stock not tendered and
exchanged pursuant to the offer. In the merger, each then outstanding share of
Motor Cargo common stock (except for shares held by Motor Cargo or that we hold
for our own account and shares of Motor Cargo common stock for which
dissenters' rights have been exercised) would be converted into the right to
receive $12.10 per share in cash. Motor Cargo shareholders will not be able to
receive Union Pacific common stock in the merger.
Our obligation to exchange shares of Union Pacific common stock and cash for
shares of Motor Cargo common stock pursuant to the offer is subject to several
conditions referred to below under "--Conditions of Our Offer," including the
minimum tender condition, the regulatory approvals condition and other
conditions that are discussed below.
Timing of Our Offer
Our offer is scheduled to expire at 12:00 midnight, New York City time on
November 29, 2001, the "expiration date," unless we extend the period of time
for which the offer is open, in which case the term "expiration date" means the
latest time and date on which the offer, as so extended, expires. For more
information, you should read the discussion under the caption "--Extension,
Termination and Amendment."
Extension, Termination and Amendment
We expressly reserve the right, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, to
extend the period of time during which our offer remains open, and we can do so
by giving oral or written notice of the extension to the exchange agent. If we
decide to so extend our offer, we will make an announcement to that effect no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. We are not making any assurance that we
will exercise our right to extend our offer, although we currently intend to do
so until all conditions have been satisfied or waived. During any such
extension, all shares of Motor Cargo common stock previously tendered and not
properly withdrawn will remain subject to the offer, subject to your right to
withdraw your shares of Motor Cargo common stock. You should read the
discussion under the caption "--Withdrawal Rights and Change of Election" for
more details.
22
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion (subject to the provisions of the merger
agreement), at any time or from time to time:
. to delay our acceptance for exchange or exchange of any shares of Motor
Cargo common stock pursuant to our offer or to terminate our offer and not
accept for exchange or exchange any shares of Motor Cargo common stock not
previously accepted for exchange, or exchanged, upon the failure of any of
the conditions of the offer to be satisfied; and
. to waive any condition or otherwise amend the offer in any respect, by
giving oral or written notice of such delay, termination or amendment to
the exchange agent and by making a public announcement.
We will follow any extension, termination, amendment or delay, as promptly
as practicable, with a public announcement. In the case of an extension, any
announcement will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to shareholders in connection with the offer be promptly sent to
shareholders in a manner reasonably designed to inform shareholders of the
change) and without limiting the manner in which we may choose to make any
public announcement, we assume no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
We confirm to you that if we make a material change in the terms of our
offer or the information concerning the offer, or if we waive a material
condition of the offer, we will extend the offer to the extent required under
the Exchange Act. If, prior to the expiration date, we change the percentage of
shares of Motor Cargo common stock being sought or the consideration offered to
you, that change will apply to all holders whose shares of Motor Cargo common
stock are accepted for exchange pursuant to our offer. If at the time notice of
that change is first published, sent or given to you, the offer is scheduled to
expire at any time earlier than the tenth business day from and including the
date that the notice is first so published, sent or given, we will extend the
offer until the expiration of that ten business-day period. For purposes of our
offer, a "business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
We may, although we do not currently intend to, elect to provide a
subsequent offering period of 3 to 20 business days after the acceptance of
shares of Motor Cargo common stock in the offer if the requirements under
Exchange Act Rule 14d-11 have been met. You will not have the right to change
your election or withdraw your shares of Motor Cargo common stock that you
tender in the subsequent offering period, if any.
Procedure for Tendering and Electing
Valid Tender. For you to validly tender shares of Motor Cargo common stock
pursuant to the offer:
. a properly completed and duly executed letter of election and transmittal
(or manually executed facsimile of that document), along with any required
signature guarantees, or an agent's message in connection with a
book-entry transfer, and any other required documents, must be transmitted
to and received by the exchange agent at one of its addresses set forth on
the back cover of this prospectus, and certificates for tendered shares of
Motor Cargo common stock must be received by the exchange agent at such
address or those shares of Motor Cargo common stock must be tendered
pursuant to the procedures for book-entry tender set forth below (and a
confirmation of receipt of such tender received (we refer to this
confirmation below as a "book-entry confirmation")), in each case before
the expiration date; or
. you must comply with the guaranteed delivery procedures set forth below.
Valid Election. Motor Cargo shareholders have the option to exchange each
of their shares of Motor Cargo common stock for:
. 0.26 of a share of Union Pacific common stock;
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. $12.10 in cash, without interest; or
. a combination of both.
Motor Cargo shareholders may elect to receive cash or Union Pacific common
stock for all of their shares of Motor Cargo common stock. To make a valid
election you must select one of the three options on the letter of election and
transmittal, or, if you hold your shares in "street name" through a broker,
instruct your broker as to your election. If you validly tender shares of Motor
Cargo common stock but fail to make an election, you will be deemed to have
elected to receive cash.
Book-Entry Transfer. The exchange agent will establish accounts with
respect to the shares of Motor Cargo common stock at The Depository Trust
Company (which we refer to as the "Book-Entry Transfer Facility") for purposes
of the offer within two business days after the date of the initial preliminary
prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility may make book-entry delivery of the shares of
Motor Cargo common stock by causing the Book-Entry Transfer Facility to
transfer such shares of Motor Cargo common stock into the exchange agent's
account in accordance with the Book-Entry Transfer Facility's procedure for the
transfer. However, although delivery of shares of Motor Cargo common stock may
be effected through book-entry at the Book-Entry Transfer Facility, the letter
of election and transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, or an agent's message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at one or more of its
addresses set forth on the back cover of this prospectus prior to the
expiration date, or the guaranteed delivery procedures described below must be
followed.
The term "agent's message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the exchange agent and forming a part of
a book-entry confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the shares of Motor Cargo common stock which are
the subject of the book-entry confirmation, that the participant has received
and agrees to be bound by the terms of the letter of election and transmittal
and that we may enforce that agreement against the participant.
Signature Guarantees. Signatures on all letters of election and transmittal
must be guaranteed by an eligible institution, except in cases in which shares
of Motor Cargo common stock are tendered either by a registered holder of
shares of Motor Cargo common stock who has not completed the box entitled
"Special Issuance Instructions" on the letter of election and transmittal or
for the account of an eligible institution.
If the certificates for shares of Motor Cargo common stock are registered in
the name of a person other than the person who signs the letter of election and
transmittal, or if certificates for unexchanged shares of Motor Cargo common
stock are to be issued to a person other than the registered holder(s), the
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates, with the signature(s) on the certificates or
stock powers guaranteed in the manner we have described above.
Guaranteed Delivery. If you wish to tender shares of Motor Cargo common
stock pursuant to our offer and your certificates are not immediately available
or you cannot deliver the certificates and all other required documents to the
exchange agent prior to the expiration date or cannot complete the procedure
for book-entry transfer on a timely basis, your shares of Motor Cargo common
stock may nevertheless be tendered, so long as all of the following conditions
are satisfied:
. you make your tender by or through an eligible institution;
. a properly completed and duly executed notice of guaranteed delivery,
substantially in the form made available by us, is received by the
exchange agent as provided below on or prior to the expiration date; and
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. the certificates for all tendered shares of Motor Cargo common stock (or a
confirmation of a book-entry transfer of such securities into the exchange
agent's account at the Book-Entry Transfer Facility as described above),
in proper form for transfer, together with a properly completed and duly
executed letter of election and transmittal (or a manually signed
facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an agent's message) and all other documents
required by the letter of election and transmittal are received by the
exchange agent within three NYSE trading days after the date of execution
of such notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail to the exchange agent and you must include a
guarantee by an eligible institution in the form set forth in that notice.
The method of delivery of Motor Cargo share certificates and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at your option and risk, and the delivery will be deemed made only
when actually received by the exchange agent. If delivery is by mail, we
recommend registered mail with return receipt requested, properly insured. In
all cases, you should allow sufficient time to ensure timely delivery.
To prevent federal income tax backup withholding with respect to cash
received pursuant to our offer, you must provide the exchange agent with your
correct taxpayer identification number and certify that you are not subject to
backup withholding of federal income tax by completing the Substitute Form W-9
included in the letter of election and transmittal. Some shareholders
(including, among others, all corporations and some foreign individuals) are
not subject to these backup withholding and reporting requirements. In order
for a foreign individual to qualify as an exempt recipient, the shareholder
must submit an appropriate Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status.
Exchange for Shares Tendered. In all cases, we will exchange shares of
Motor Cargo common stock tendered and accepted for exchange pursuant to our
offer only after timely receipt by the exchange agent of certificates for
shares of Motor Cargo common stock (or timely confirmation of a book-entry
transfer of such securities into the exchange agent's account at the Book-Entry
Transfer Facility as described above), properly completed and duly executed
letter(s) of election and transmittal (or a manually signed facsimile(s)
thereof), or an agent's message in connection with a book-entry transfer, and
any other required documents.
Appointment. By executing a letter of election and transmittal as set forth
above, you irrevocably appoint our designees as your attorneys-in-fact and
proxies, each with full power of substitution, to the full extent of your
rights with respect to your shares of Motor Cargo common stock tendered and
accepted for exchange by us and with respect to any and all other shares of
Motor Cargo common stock and other securities issued or issuable in respect of
the shares of Motor Cargo common stock on or after October 15, 2001. That
appointment is effective, and voting rights will be affected, when and only to
the extent that we accept the shares of Motor Cargo common stock that you have
tendered with the exchange agent. All such proxies will be considered coupled
with an interest in the tendered shares of Motor Cargo common stock and
therefore will not be revocable. Upon the effectiveness of such appointment,
all prior proxies that you have given will be revoked, and you may not give any
subsequent proxies (and, if given, they will not be deemed effective). Our
designees will, with respect to the shares of Motor Cargo common stock for
which the appointment is effective, be empowered, among other things, to
exercise all of your voting and other rights as they, in their sole discretion,
deem proper at any annual, special or adjourned meeting of Motor Cargo's
shareholders or otherwise. We reserve the right to require that, in order for
shares of Motor Cargo common stock to be deemed validly tendered, immediately
upon our exchange of those shares of Motor Cargo common stock, we must be able
to exercise full voting rights with respect to such shares of Motor Cargo
common stock.
Determination of Validity. We will decide questions as to the validity,
form, eligibility (including time of receipt) and acceptance for exchange of
any tender of shares of Motor Cargo common stock or election with
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respect to your shares of Motor Cargo common stock, in our sole discretion, and
our determination will be final and binding. We reserve the absolute right to
reject any and all tenders of shares of Motor Cargo common stock that we
determine are not in proper form or the acceptance of or exchange for which
may, in the opinion of our counsel, be unlawful. We also reserve the absolute
right to waive any defect or irregularity in the tender of any shares of Motor
Cargo common stock. No tender of shares of Motor Cargo common stock will be
deemed to have been validly made until all defects and irregularities in
tenders of shares of Motor Cargo common stock have been cured or waived.
Neither we, the exchange agent, the information agent nor any other person
will be under any duty to give notification of any defects or irregularities in
the tender of, or election with respect to, any shares of Motor Cargo common
stock or will incur any liability for failure to give any such notification.
Our interpretation of the terms and conditions of our offer (including the
letter of election and transmittal and instructions thereto) will be final and
binding.
Binding Agreement. The tender of shares of Motor Cargo common stock
pursuant to any of the procedures described above will constitute a binding
agreement between us and you upon the terms and subject to the conditions of
the offer.
Withdrawal Rights and Change of Election
Withdrawal Rights. Your tender of shares of Motor Cargo common stock
pursuant to the offer is irrevocable, except that, other than during a
subsequent offering period, shares of Motor Cargo common stock tendered
pursuant to the offer may be withdrawn at any time prior to the expiration
date, and, unless we previously accepted them pursuant to the offer, may also
be withdrawn at any time after December 29, 2001. If we elect to provide a
subsequent offering period under Exchange Act Rule 14d-11, you will not have
the right to change your election or withdraw shares of Motor Cargo common
stock that you tender in the subsequent offering period.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telex or facsimile transmission notice of withdrawal at one of
its addresses set forth on the back cover of this prospectus, and your notice
must include your name, address, social security number, the certificate
number(s) and the number of shares of Motor Cargo common stock to be withdrawn
as well as the name of the registered holder, if it is different from that of
the person who tendered those shares of Motor Cargo common stock.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial institution
must be a participant in the Securities Transfer Agents Medallion Program, an
"eligible institution," unless those shares of Motor Cargo common stock have
been tendered for the account of any eligible institution. If shares of Motor
Cargo common stock have been tendered pursuant to the procedures for book-entry
tender discussed under the caption entitled "--Procedure for Tendering and
Electing," any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
shares of Motor Cargo common stock and must otherwise comply with the
Book-Entry Transfer Facility's procedures. If certificates have been delivered
or otherwise identified to the exchange agent, the name of the registered
holder and the serial numbers of the particular certificates evidencing the
shares of Motor Cargo common stock withdrawn must also be furnished to the
exchange agent, as stated above, prior to the physical release of the
certificates.
We will decide all questions as to the form and validity (including time of
receipt) of any notice of withdrawal, in our sole discretion, and our decision
will be final and binding. Neither we, the exchange agent, the information
agent nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or will incur any
liability for failure to give any notification. Shares of Motor Cargo common
stock properly withdrawn will be deemed not to have been validly tendered for
purposes of our offer.
26
However, you may retender withdrawn shares of Motor Cargo common stock by
following one of the procedures discussed under the captions entitled
"--Procedure for Tendering and Electing--Valid Tender" or "--Procedure for
Tendering and Electing--Guaranteed Delivery" at any time prior to the
expiration date.
Revocation or Change of Election. An election is irrevocable, except that,
other than during a subsequent offering period, shares tendered may be
withdrawn at any time prior to the expiration date and, unless previously
accepted pursuant to the offer, may also be withdrawn at any time after
December 29, 2001. If we elect to provide a subsequent offering period under
Exchange Act Rule 14d-11, you will not have the right to change your election
that you tender in the subsequent offering period. After an effective
withdrawal you may change your election and retender withdrawn shares of Motor
Cargo common stock by following one of the procedures discussed under the
caption entitled "--Procedure for Tendering and Electing" at any time prior to
the expiration date.
Exchange of Shares of Motor Cargo Common Stock; Delivery of Union Pacific
Common Stock and Cash
Upon the terms and subject to the conditions of our offer (including, if the
offer is extended or amended, the terms and conditions of the extension or
amendment), we will accept for exchange, and will exchange, shares of Motor
Cargo common stock validly tendered and not properly withdrawn as promptly as
practicable after the expiration date. In addition, subject to applicable rules
of the SEC, we expressly reserve the right to delay acceptance for exchange or
the exchange of shares of Motor Cargo common stock in order to comply with any
applicable law. In all cases, exchange of shares of Motor Cargo common stock
tendered and accepted for exchange pursuant to the offer will be made only
after timely receipt by the exchange agent of:
. certificates for those shares of Motor Cargo common stock (or a
confirmation of a book-entry transfer of those shares of Motor Cargo
common stock in the exchange agent's account at the Book-Entry Transfer
Facility);
. a properly completed and duly executed letter of election and transmittal
(or a manually signed facsimile of that document); and
. any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
shares of Motor Cargo common stock validly tendered and not properly withdrawn
as, if and when we notify the exchange agent of our acceptance of the tenders
of those shares of Motor Cargo common stock pursuant to the offer. The exchange
agent will deliver cash and Union Pacific common stock in exchange for shares
of Motor Cargo common stock pursuant to the offer and cash instead of
fractional shares of Union Pacific common stock as soon as practicable after
receipt of our notice. The exchange agent will act as agent for tendering
shareholders for the purpose of receiving cash (including cash to be paid
instead of fractional shares of Union Pacific common stock) from us and
transmitting such cash to you and causing the shares of Union Pacific common
stock to be delivered to you. You will not receive any interest on any cash
that we pay you, even if there is a delay in making the exchange.
If we do not accept any tendered shares of Motor Cargo common stock for
exchange pursuant to the terms and conditions of the offer for any reason, or
if certificates are submitted for more shares of Motor Cargo common stock than
are tendered, we will return certificates for such unexchanged shares of Motor
Cargo common stock without expense to the tendering shareholder or, in the case
of shares of Motor Cargo common stock tendered by book-entry transfer of such
shares of Motor Cargo common stock into the exchange agent's account at the
Book-Entry Transfer Facility pursuant to the procedures set forth above under
the caption entitled "--Procedure for Tendering and Electing," those shares of
Motor Cargo common stock will be credited to an account maintained within the
Book-Entry Transfer Facility, as soon as practicable following expiration or
termination of the offer.
27
Cash Instead of Fractional Shares of Union Pacific Common Stock
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering shareholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to that fraction multiplied by the closing price for a
share of Union Pacific common stock, as reported on the NYSE Composite
Transaction Tape, on the date that we accept those shares of Motor Cargo common
stock for exchange.
Material United States Federal Income Tax Consequences
The following is a general summary of the material United States federal
income tax consequences of the offer and the merger applicable to a person that
exchanges shares of Motor Cargo common stock for shares of Union Pacific common
stock and/or cash pursuant to the offer and the merger. This discussion is
based upon the Code, Treasury Regulations, judicial authorities, published
positions of the IRS and other applicable authorities, all as in effect on the
date of this prospectus and all of which are subject to change or differing
interpretations (possibly with retroactive effect). This discussion is limited
to United States persons that hold their shares of Motor Cargo common stock as
capital assets for United States federal income tax purposes and does not
address the tax treatment to shareholders who hold their shares through a
partnership or other pass-through entity. This discussion does not address all
aspects of United States federal income taxation that may be relevant to Motor
Cargo shareholders in light of their particular circumstances or to Motor Cargo
shareholders subject to special treatment under United States federal income
tax law or to Motor Cargo shareholders who hold multiple blocks of Motor Cargo
common stock that were acquired at different prices or at different times.
Furthermore, this summary does not address any aspect of state, local or
foreign taxation. No assurance can be given that the IRS would not assert, or
that a court would not sustain, a position contrary to any of the tax aspects
set forth below. Holders of shares of Motor Cargo common stock are encouraged
to consult their own tax advisors as to the United States federal income tax
consequences of the offer and the merger, as well as the effects of state,
local and foreign tax laws.
Union Pacific expects that the offer and the merger will be treated as a
single integrated transaction for United States federal income tax purposes. In
the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Union
Pacific, filed as exhibit 8.1 to the registration statement of which this
prospectus forms a part, if the offer and the merger are treated as a single
integrated transaction and assuming that the merger is effected as a merger of
Motor Cargo with and into Merger Subsidiary (the "forward merger"), then the
offer and the forward merger will be treated as a "reorganization" within the
meaning of Section 368(a) of the Code. As such a "reorganization," the United
States federal income tax consequences of the offer and the forward merger can
be generally summarized as follows:
Exchange of Shares Solely for Union Pacific Common Stock. A holder of
shares of Motor Cargo common stock that exchanges all of its shares for shares
of Union Pacific common stock pursuant to the offer will not recognize any gain
or loss except with respect to cash received in lieu of a fractional share of
Union Pacific common stock. See the discussion of this issue set forth below
under the caption entitled "--Cash Received in Lieu of a Fractional Share of
Union Pacific Common Stock."
Exchange of Shares Solely for Cash. A holder of shares of Motor Cargo
common stock that exchanges all of its shares for cash pursuant to the offer
and/or the forward merger generally will recognize capital gain or loss
measured by the difference between the amount of cash received with respect to
each share of Motor Cargo common stock and the adjusted tax basis of each share
of Motor Cargo common stock exchanged therefor. The capital gain or loss will
be long-term capital gain or loss if the shareholder's holding period with
respect to its Motor Cargo common stock exceeds one year. Although the receipt
of cash by a holder of Motor Cargo common stock generally would be eligible for
capital gain treatment as described above, depending upon a shareholder's
particular circumstances, the receipt of cash by the shareholder may have the
effect of a distribution of a dividend, in which case such cash will be treated
as ordinary dividend income to the extent of the holder's ratable share of
accumulated earnings and profits as calculated for United States federal income
tax purposes. See the discussion of this issue set forth below under the
caption entitled "--Exchange of Shares for Cash and Union Pacific Common Stock."
28
Exchange of Shares for Cash and Union Pacific Common Stock. A holder of
shares of Motor Cargo common stock that exchanges its shares of Motor Cargo
common stock for shares of Union Pacific common stock pursuant to the offer and
cash pursuant to the offer and/or the forward merger will recognize gain (but
not loss) in an amount equal to the lesser of (1) the amount of cash received
pursuant to the offer and/or the forward merger and (2) an amount equal to the
excess, if any, of (a) the sum of the amount of cash received pursuant to the
offer and/or the forward merger and the fair market value of the Union Pacific
common stock received pursuant to the offer over (b) the holder's adjusted tax
basis in its shares of Motor Cargo common stock. The gain recognized will be
capital gain unless the receipt of cash by the holder has the effect of a
distribution of a dividend, in which case such gain will be treated as ordinary
dividend income to the extent of the holder's ratable share of accumulated
earnings and profits as calculated for United States federal income tax
purposes. For purposes of determining whether the receipt of cash by the holder
has the effect of a distribution of a dividend, a holder will be treated as if
the holder first exchanged all of its shares of Motor Cargo common stock solely
for shares of Union Pacific common stock and then Union Pacific immediately
redeemed a portion of such stock for the cash that such holder actually
received pursuant to the offer and/or the forward merger. The IRS has indicated
in rulings that any reduction in the interest of a minority shareholder that
owns a small number of shares in a publicly and widely held corporation and
that exercises no control over corporate affairs would receive capital gain (as
opposed to dividend) treatment. In determining whether the receipt of cash has
the effect of a distribution of a dividend, certain constructive ownership
rules must be taken into account. Any recognized capital gain will be long-term
capital gain if the shareholder's holding period with respect to its Motor
Cargo common stock exceeds one year.
Tax Basis for Union Pacific Common Stock. A holder of shares of Motor Cargo
common stock will have an aggregate tax basis in the shares of Union Pacific
common stock received pursuant to the offer equal to the holder's aggregate
adjusted tax basis in its shares of Motor Cargo common stock surrendered
pursuant to the offer and/or the forward merger, (1) reduced by (a) the portion
of the holder's adjusted tax basis in its shares of Motor Cargo common stock
surrendered in the offer that is allocable to a fractional share of Union
Pacific common stock for which cash is received and (b) the amount of cash, if
any, received by the holder pursuant to the offer and/or the forward merger,
and (2) increased by the amount of gain (including any portion of such gain
that is treated as a dividend as described above), if any, recognized by the
holder (but not by gain recognized upon the receipt of cash in lieu of a
fractional share of Union Pacific common stock pursuant to the offer).
Holding Period for Union Pacific Common Stock. The holding period for
shares of Union Pacific common stock received by a holder of shares of Motor
Cargo common stock pursuant to the offer will include the holding period for
the shares of Motor Cargo common stock surrendered.
Cash Received in Lieu of a Fractional Share of Union Pacific Common
Stock. If a holder of shares of Motor Cargo common stock receives cash in lieu
of a fractional share of Union Pacific common stock in the offer, the holder
will generally recognize capital gain or loss equal to the difference between
the amount of cash received in lieu of the fractional share and the portion of
the holder's adjusted tax basis in its shares of Motor Cargo common stock
surrendered that is allocable to the fractional share. The capital gain or loss
will be long-term capital gain or loss if the holder's holding period for the
portion of the shares deemed exchanged for the fractional share is more than
one year.
Treatment of the Entities. No gain or loss will be recognized by Union
Pacific, Merger Subsidiary or Motor Cargo as a result of the offer or the
forward merger.
Reporting Requirements. Motor Cargo shareholders receiving Union Pacific
common stock in the offer should file a statement with their United States
federal income tax returns setting forth their adjusted tax basis in the Motor
Cargo common stock exchanged in the offer and/or the forward merger and the
fair market value of the Union Pacific common stock and the amount of any cash
received in the offer and/or the forward merger. In addition, Motor Cargo
shareholders will be required to retain permanent records of these facts
relating to the offer and the forward merger.
29
Under the merger agreement, Union Pacific and Motor Cargo have agreed to use
their reasonable best efforts in order for Union Pacific to obtain an opinion
of Skadden, Arps, Slate, Meagher & Flom LLP at the closing of the merger that,
based upon, among other things, the facts described herein and customary
representations and assumptions, the offer and the forward merger will be
treated as a "reorganization" within the meaning of Section 368(a) of the Code.
Union Pacific expects to be able to obtain the closing tax opinion if:
. Union Pacific and Motor Cargo are able to deliver customary
representations to counsel;
. there is no adverse change in United States federal income tax law; and
. at the effective time of the forward merger, the aggregate fair market
value at such time of the Union Pacific common stock previously delivered
as consideration pursuant to the offer is greater than 42% of the sum of
(1) the aggregate fair market value of such Union Pacific common stock at
the effective time of the forward merger and (2) the aggregate amount of
cash paid pursuant to the offer and the forward merger.
The closing tax opinion is not a condition to completing the offer or the
merger. If Union Pacific obtains the closing tax opinion, then the merger will
be effected as a forward merger (and the United States federal income tax
consequences will be as summarized above). An opinion of counsel is not binding
on the IRS or any court. If Union Pacific is not able to obtain the closing tax
opinion, then Union Pacific expects that it will exercise its reasonable
discretion to change the merger in form from a forward merger to a merger of
Merger Subsidiary with and into Motor Cargo (the "reverse merger"), which, as
summarized below, will be a fully taxable transaction for all holders of shares
of Motor Cargo common stock, but not for Union Pacific, Merger Subsidiary or
Motor Cargo.
In the event of the reverse merger, the tax consequences to holders of
shares of Motor Cargo common stock would differ materially from those
summarized above. In general, each holder of shares of Motor Cargo common stock
will recognize capital gain or loss in the offer and/or the reverse merger in
an amount equal to (1) the sum of the amount of cash received pursuant to the
offer and/or the reverse merger and the fair market value of shares of Union
Pacific common stock received pursuant to the offer minus (2) the holder's
adjusted tax basis in its shares of Motor Cargo common stock. The capital gain
or loss will be long-term capital gain or loss if the holder had held such
shares for more than one year.
The determination by counsel as to whether the offer and the proposed
forward merger will be treated as a "reorganization" within the meaning of
Section 368(a) of the Code will depend upon the facts and law existing at the
effective time of the proposed forward merger. It is possible that Union
Pacific will not be able to obtain the closing tax opinion. Thus, no assurance
can be given that the form of the merger will be a forward merger as opposed to
a fully-taxable reverse merger.
The foregoing discussion is intended only as a summary and does not purport
to be a complete analysis or listing of all potential federal income tax
consequences of the offer and the merger. Motor Cargo shareholders are urged to
consult their tax advisors concerning the United States federal, state, local
and foreign tax consequences of the offer and the merger to them.
Purpose of Our Offer; The Merger; Dissenters' Rights
Purpose. We are making the offer in order to acquire all of the outstanding
shares of Motor Cargo common stock. We intend, as soon as practicable after
completion of the offer, to have Motor Cargo merge with and into Merger
Subsidiary or to have Merger Subsidiary merge with and into Motor Cargo,
depending on certain tax matters. The purpose of the merger is to acquire all
shares of Motor Cargo common stock not tendered and exchanged pursuant to the
offer. In the merger, each then outstanding Motor Cargo share (except for
shares held by Motor Cargo or that we hold for our own account and shares of
Motor Cargo common stock for which dissenters' rights have been exercised) will
be converted into the right to receive $12.10 in cash, without interest.
30
Plans for Motor Cargo. Following the completion of the offer and the
merger, Motor Cargo will be operated separately from Overnite and will maintain
its own corporate identity. There are no plans to merge any of the operating
facilities or operating employees of Overnite and Motor Cargo, but over time,
there may be some efficiencies realized from combining some administrative
functions into a parent company.
Union Pacific and Overnite plan to grow a partnership between Overnite and
Motor Cargo whereby Overnite and Motor Cargo will offer through billing and
through tracing to customers that Overnite does not serve directly in the
Western United States and customers that Motor Cargo does not serve in the
other parts of the United States. Union Pacific expects that the partnership
between Overnite and Motor Cargo will lead to growth for both companies.
Approval of the Merger. Under Section 16-10a-1101 of the Utah Revised
Business Corporation Act (the "URBCA"), the approval of the board of directors
of Motor Cargo and the affirmative vote of the holders of a majority of its
outstanding shares are required to approve and adopt a merger and a merger
agreement. The Motor Cargo board of directors has previously approved and
adopted the merger and the merger agreement. Accordingly, if we complete the
offer (after satisfaction of the minimum tender condition), we would have a
sufficient number of shares of Motor Cargo common stock to approve the merger
without the affirmative vote of any other holder of shares of Motor Cargo
common stock. Therefore, unless the merger is consummated in accordance with
the short-form merger provisions under the URBCA described below (in which case
no action by the shareholders of Motor Cargo, other than Union Pacific, will be
required to consummate the merger), the only remaining corporate action of
Motor Cargo will be the approval and adoption of the merger agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Motor Cargo common stock.
Possible Short-Form Merger. Section 16-10a-1104 of the URBCA would permit
the merger to occur without a vote of Motor Cargo's shareholders (a "short-form
merger") if Union Pacific were to acquire at least 90% of the outstanding
shares of Motor Cargo common stock in the offer or otherwise (including as a
result of purchases by Union Pacific during any subsequent offering period) and
contribute the shares immediately prior to the merger to Merger Subsidiary. If,
however, Union Pacific does not acquire at least 90% of the then outstanding
shares of Motor Cargo common stock pursuant to the offer or otherwise, and a
vote of Motor Cargo's shareholders is required under the URBCA, a longer period
of time will be required to effect the merger. Union Pacific has agreed in the
merger agreement to effect the merger at the earliest practicable time, and to
effect the merger as a short-form merger if it obtains ownership of at least
90% of the issued and outstanding shares of Motor Cargo common stock in the
offer.
Dissenters' Rights. Motor Cargo shareholders do not have dissenters' rights
in connection with the offer. Motor Cargo shareholders who have not exchanged
their shares of Motor Cargo common stock in connection with the offer will be
entitled to dissenters' rights with respect to the merger. Motor Cargo
shareholders at the time of the merger will have the right under Section
16-10a-1302 of the URBCA to dissent and demand appraisal of their shares of
Motor Cargo common stock. Shareholders dissenting under Section 16-10a-1302 of
the URBCA who comply with the applicable statutory procedures will be entitled
to receive judicial determination of the fair value of their shares of Motor
Cargo common stock and to receive payment of such fair value in cash, together
with a rate of interest, if any.
Conditions of Our Offer
The offer is subject to a number of conditions, which are described below:
Minimum Tender Condition. There must be validly tendered and not properly
withdrawn prior to the expiration of the offer a number of shares of Motor
Cargo common stock which will constitute at least two-thirds of the total
number of outstanding shares of Motor Cargo common stock on a fully diluted
basis (including, for purposes of the calculation, all shares of Motor Cargo
common stock issuable upon exercise of all options and the conversion or
exchange of all securities convertible or exchangeable into Motor Cargo) as of
the date that we
31
accept the shares of Motor Cargo common stock pursuant to our offer. Based on
information supplied by Motor Cargo, the number of shares of Motor Cargo common
stock needed to satisfy the minimum tender condition would have been 4,549,027
as of October 26, 2001. As of October 26, 2001, there were 6,473,140 shares of
Motor Cargo common stock and 350,400 options to purchase shares of Motor Cargo
common stock outstanding. We have entered into shareholder agreements with each
of Mr. Tate and Mr. Friedland pursuant to which they have agreed to tender all
shares of Motor Cargo common stock beneficially owned by them. Mr. Tate and Mr.
Friedland together beneficially own 4,046,153 shares of Motor Cargo's common
stock, which is approximately 59.3% of the total outstanding shares of Motor
Cargo common stock on a fully diluted basis. Following the tender by Mr. Tate
and Mr. Friedland, we will only need approximately 502,874 (or approximately
7.7% of the outstanding shares of Motor Cargo common stock on a fully diluted
basis) additional shares to be tendered in order to satisfy the minimum
condition.
Antitrust Condition. This condition would be satisfied if all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the ''HSR Act''), and any applicable antitrust laws have expired or
been terminated.
Registration Statement Effectiveness Condition. The registration statement
on Form S-4 of which this prospectus is a part must have become effective under
the Securities Act and not be the subject of any stop order or proceedings
seeking a stop order.
NYSE Listing Condition. The shares of Union Pacific common stock issuable
to Motor Cargo shareholders in the offer must have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance.
Other Conditions of the Offer. Prior to the expiration of the offer, unless
waived by us, the offer is also subject to the conditions that:
. there must not have been instituted, pending or threatened any action or
proceeding by any governmental authority:
--challenging or seeking to make illegal, to delay materially or otherwise
directly or indirectly to restrain or prohibit or make materially more
costly the making of the offer, the acceptance for exchange of, or the
exchange or delivery of the Union Pacific common stock or cash for some
of or all the shares of Motor Cargo common stock by us or the
consummation by us of the merger;
--seeking to obtain material damages or otherwise directly or indirectly
relating to the transactions contemplated by the merger agreement, the
offer or the merger;
--seeking to limit, restrain or prohibit ownership or operation by us,
Merger Subsidiary or our respective subsidiaries or affiliates of all or
any portion of the business or assets of Motor Cargo and its
subsidiaries, taken as a whole, or of us and our subsidiaries, taken as
a whole, or to compel us or any of our subsidiaries or affiliates to
dispose of or hold separate all or any portion of our business or assets
and that of our subsidiaries, taken as a whole, or of our and our
subsidiaries, taken as a whole;
--seeking to impose or confirm limitations on the ability of us or any of
our subsidiaries or affiliates effectively to exercise full rights of
ownership of any shares of Motor Cargo common stock, including the right
to vote any shares of Motor Cargo common stock to be acquired pursuant
to the offer or owned by us or any of our subsidiaries or affiliates on
all matters presented to Motor Cargo's shareholders (including the
approval and adoption of the merger agreement and the merger), or
seeking to require divestiture by us or any of our subsidiaries or
affiliates of any shares of Motor Cargo common stock; or
--which otherwise has, or would reasonably be expected to have, a material
adverse effect on us or Motor Cargo, as defined in the merger agreement;
. there must not have been any action taken, or any statute, rule,
regulation, judgment, order, legislation or interpretation pending,
proposed, enacted, enforced, promulgated, amended or issued by any
32
governmental authority or deemed by any governmental authority applicable
to (i) Motor Cargo, us or any subsidiary or affiliate of Motor Cargo or
ours or (ii) any transaction contemplated by the merger agreement, which
in our judgment is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in the immediately preceding paragraph;
. there must not have occurred or exist any facts, changes, events or
effects that have, or would reasonably be expected to have, a material
adverse effect on Motor Cargo;
. there must not have occurred:
--any general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange or the Nasdaq National Market
other than (1) a shortening of trading hours or any coordinated trading
halt triggered solely as a result of a specified increase or decrease in
a market index or (2) a suspension of not more than twenty-four hours
solely relating to a bomb threat or other substantially similar threat
directed to the New York Stock Exchange or the Nasdaq National Market;
--a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States;
--any limitation (whether or not mandatory) on the extension of credit by
banks or other lending institutions in the United States;
--the commencement of a war, armed hostilities or any other international
or national calamity involving the United States; or
--in the case of any of the foregoing existing at the time of the
commencement of the offer, an acceleration or a worsening thereof;
. Motor Cargo must not have failed to perform in any material respect any
obligation under the merger agreement or to comply in any material respect
with any agreement or covenant of Motor Cargo to be performed or complied
with by it under the merger agreement;
. the representations and warranties of Motor Cargo set forth in the merger
agreement that are qualified as to materiality must be true and correct as
so qualified in all respects as of the date of the merger agreement and as
of the expiration of the offer (including any extension of the offer)
(except to the extent expressly made as of an earlier date, in which case
as of such date), or any of the representations and warranties set forth
in the merger agreement that are not so qualified must be true and correct
in all material respects as of the date of the merger agreement and as of
the expiration of the offer (including any extension of the offer), except
to the extent expressly made as of an earlier date, in which case as of
such date;
. the merger agreement must not have been terminated in accordance with its
terms;
. the board of directors of Motor Cargo (or any committee of the board of
directors) must not have (1) withdrawn, qualified, modified or amended, or
proposed to withdraw, qualify, modify or amend, in a manner adverse to us,
their recommendations that the shareholders of Motor Cargo accept the
offer, tender their shares of Motor Cargo common stock to us and approve
and adopt the merger agreement and the merger or take any action or make
any statement, filing or release inconsistent with the recommendations (it
being understood that taking a neutral position or no position with
respect to an acquisition proposal is considered an adverse modification
of the recommendations), (2) approved or recommended, or proposed publicly
to approve or recommend, any acquisition proposal or (3) caused Motor
Cargo to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any
acquisition proposal;
. a third party must not have become the beneficial owner of 15% or more of
the outstanding shares of Motor Cargo common stock and must not have
acquired, directly or indirectly, 15% or more of the assets of Motor Cargo
and its subsidiaries;
33
. Motor Cargo and Union Pacific must not have agreed to terminate the offer
or postpone the acceptance for payment of or payment for shares of Motor
Cargo common stock;
. Harold R. Tate and Marvin L. Friedland must not have breached their
respective shareholder agreements; and
. no representation and warranty relating to corporate authorization and
specific actions relating to pre-approval corporate matters must have been
breached in any respect or are inaccurate in any respect.
The conditions of the offer described above are solely for our benefit and
we may assert them regardless of the circumstances giving rise to any such
conditions, including any action or inaction by us. We may, in our discretion,
waive these conditions in whole or in part. The determination as to whether any
condition has been satisfied will be in our good faith judgment and will be
final and binding on all parties. The failure by us at any time to exercise any
of the foregoing rights will not be deemed a waiver of any such right and each
such right will be deemed a continuing right which may be asserted at any time
and from time to time. Notwithstanding anything to the contrary in this
prospectus, we cannot and will not assert any of the conditions to the offer,
other than certain regulatory conditions as, and to the extent, permitted by
applicable rules and regulations of the SEC, at any time after the expiration
date of the offer.
State Takeover Laws and Regulatory Approvals
Except as set forth herein, we are not aware of any licenses or regulatory
permits that appear to be material to the business of Motor Cargo and its
subsidiaries, taken as a whole, and that might be adversely affected by our
acquisition of shares of Motor Cargo common stock in the offer. In addition,
except as set forth herein, we are not aware of any filings, approvals or other
actions by or with any governmental authority or administrative or regulatory
agency that would be required for our acquisition or ownership of the shares of
Motor Cargo common stock. Should any such approval or other action be required,
we expect to seek such approval or action, except as described under "State
Takeover Laws." Should any such approval or other action be required, we cannot
be certain that we would be able to obtain any such approval or action without
substantial conditions or that adverse consequences might not result to Motor
Cargo's or its subsidiaries' businesses, or that certain parts of Motor
Cargo's, Union Pacific's or any of their respective subsidiaries' businesses
might not have to be disposed of or held separate in order to obtain such
approval or action. In that event, we may not be required to purchase any
shares of Motor Cargo common stock in the offer.
State Takeover Laws. The Utah Control Shares Acquisitions Act, which we
refer to as the CAA below, provides that a person who makes a control share
acquisition will not be permitted to vote those shares unless approved in
accordance with the statute. "Control shares" means shares of an issuing public
corporation, such as Motor Cargo, that would entitle the person to exercise or
direct the exercise of the voting power of the corporation in the election of
directors of over 20% of all voting power. Under certain circumstances, the CAA
makes it more difficult for an interested shareholder to effect a change in
control of a corporation, although the board of directors or the shareholders
may, by adopting an amendment to the corporation's articles of incorporation or
bylaws, elect not to be governed by the CAA, if the amendment is effective
prior to the control share acquisition. Prior to the execution of the merger
agreement, the board of directors of Motor Cargo unanimously approved an
amendment to the bylaws of Motor Cargo which provides that the CAA will not
apply to the shares of Motor Cargo common stock. As a result of such amendment,
the provisions of the CAA are not applicable to any of the transactions
contemplated by the merger agreement, including the offer, the merger and the
shareholder agreements.
A number of states have adopted takeover laws and regulations that purport
to be applicable to attempts to acquire securities of corporations that are
incorporated in those states or that have substantial assets, shareholders,
principal executive offices or principal places of business in those states. To
the extent that these state takeover statutes purport to apply to the offer or
the merger, we believe that those laws conflict with United States federal law
and are an unconstitutional burden on interstate commerce. In 1982, the Supreme
Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers
34
Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. The reasoning in that
decision is likely to apply to certain other state takeover statutes. In 1987,
however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the
United States held that the State of Indiana could as a matter of corporate law
and, in particular, those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
shareholders, as long as those laws were applicable only under certain
conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal
district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma, because they would subject those corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held, in Grand
Metropolitan Plc v. Butterworth, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Motor Cargo has taken all actions necessary to ensure that the CAA will not
apply in connection with the offer or the merger. We reserve the right to
challenge the validity or applicability of any state law allegedly applicable
to the offer or the merger, and nothing herein nor any action that we take in
connection with the offer is intended as a waiver of that right. In the event
that it is asserted that one or more takeover statutes apply to the offer or
the merger, and it is not determined by an appropriate court that the statutes
in question do not apply or are invalid as applied to the offer or the merger,
as applicable, we may be required to file certain documents with, or receive
approvals from, the relevant state authorities, and we might be unable to
accept for payment or purchase shares of Motor Cargo common stock tendered in
the offer or be delayed in continuing or consummating the offer. In that case,
we may not be obligated to accept for purchase, or pay for, any shares of Motor
Cargo common stock tendered.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of shares of Motor Cargo common stock pursuant to
the offer is subject to these requirements.
Pursuant to the requirements of the HSR Act, we filed a Notification and
Report Form with respect to the offer with the Antitrust Division and the FTC
on October 26, 2001. The offer cannot be completed until a required waiting
period of 30 days from the date of our filing has expired or been terminated
earlier by the FTC or the Antitrust Division. The FTC or the Antitrust Division
can also request additional information and materials from Union Pacific in
connection with their review of the offer. Should there be an additional
request, Union Pacific and Motor Cargo cannot complete the offer until 30 days
after Union Pacific has substantially complied with the request for additional
information, unless the 30-day waiting period is terminated early. If either
agency believes that the offer would violate the federal antitrust laws by
substantially lessening competition in any line of commerce affecting United
States consumers, they have the authority to seek to enjoin the transactions.
We can give no assurance that a challenge to the offer will not be made or, if
such a challenge is made, that it would be unsuccessful. Expiration or
termination of the HSR Act waiting period is a condition to the offer.
Private parties (including individual states) may also bring legal actions
under the antitrust laws. We do not believe that the consummation of the offer
will result in a violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the offer on antitrust grounds will not be
made, or what the result will be if such a challenge is made. For a description
of certain conditions to the offer, including conditions with respect to
litigation and certain governmental actions and for certain termination rights
in connection with antitrust suits, see "--Conditions of Our Offer."
35
Certain Effects of the Offer
Market for the Shares. The tender of shares of Motor Cargo common stock
pursuant to the offer will reduce the number of shares of Motor Cargo common
stock that might otherwise trade publicly and will reduce the number of holders
of shares of Motor Cargo common stock and could adversely affect the liquidity
and market value of the remaining shares of Motor Cargo common stock held by
the public.
Nasdaq National Market Listing. Depending upon the number of shares of
Motor Cargo common stock purchased pursuant to the offer, the shares of Motor
Cargo common stock may no longer meet the requirements of the National
Association of Securities Dealers for continued inclusion on the Nasdaq
National Market, which requires that an issuer either:
. have at least 750,000 publicly held shares, held by at least 400 round lot
shareholders, with a market value of at least $5,000,000, have at least
two market makers, have net tangible assets of at least $4 million, and
have a minimum bid price of $1; or
. have at least 1,100,000 publicly held shares, held by at least 400 round
lot shareholders, with a market value of at least $15,000,000, have a
minimum bid price of $5, have at least 4 market makers and have either (1)
a market capitalization of at least $50,000,000 or (2) a total of at least
$50,000,000 in assets and revenues, respectively.
If the Nasdaq National Market ceased publishing quotations for the shares of
Motor Cargo common stock, it is possible that the shares of Motor Cargo common
stock would continue to trade in the over-the-counter market and that price or
other quotations would be reported by other sources. The extent of the public
market for such shares of Motor Cargo common stock and the availability of such
quotations would depend, however, upon such factors as the number of
shareholders and/or the aggregate market value of such securities remaining at
such time, the interest in maintaining a market in the shares of Motor Cargo
common stock on the part of securities firms, the possible termination of
registration under the Exchange Act as described below, and other factors. We
cannot predict whether the reduction in the number of shares of Motor Cargo
common stock that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for, or marketability of, the shares of
Motor Cargo common stock or whether it would cause future market prices to be
greater or lesser than the price we are presently offering.
Registration Under the Exchange Act. Shares of Motor Cargo common stock are
currently registered under the Exchange Act. Motor Cargo can terminate that
registration upon application to the SEC if the outstanding shares are not
listed on a national securities exchange and if there are fewer than 300
holders of record of shares of Motor Cargo common stock. Termination of
registration of the shares of Motor Cargo common stock under the Exchange Act
would reduce the information that Motor Cargo must furnish to its shareholders
and to the SEC and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of furnishing a proxy statement in connection with shareholders meetings
pursuant to Section 14(a) and the related requirement of furnishing an annual
report to shareholders, no longer applicable with respect to shares of Motor
Cargo common stock. In addition, if shares of Motor Cargo common stock are no
longer registered under the Exchange Act, the requirements of Rule 13e-3 under
the Exchange Act with respect to "going-private" transactions would no longer
be applicable to Motor Cargo. Furthermore, the ability of "affiliates" of Motor
Cargo and persons holding "restricted securities" of Motor Cargo to dispose of
such securities pursuant to Rule 144 under the Securities Act may be impaired
or eliminated. If registration of the shares under the Exchange Act were
terminated, they would no longer be eligible for Nasdaq National Market listing
or for continued inclusion on the Federal Reserve Board's list of "margin
securities."
Status as "Margin Securities." The shares of Motor Cargo common stock are
presently "margin securities" under the regulations of the Federal Reserve
Board, which has the effect, among other things, of allowing brokers to extend
credit on the collateral of shares of Motor Cargo common stock. Depending on
the factors similar to those described above with respect to listing and market
quotations, following consummation of
36
the offer, the shares of Motor Cargo common stock may no longer constitute
"margin securities" for the purposes of the Federal Reserve Board's margin
regulations, in which event the shares of Motor Cargo common stock would be
ineligible as collateral for margin loans made by brokers.
Source and Amount of Funds
We estimate that the total amount of funds required to purchase all of the
shares of Motor Cargo common stock pursuant to the offer, assuming that only
Mr. Tate and Mr. Friedland elect to receive shares of Union Pacific common
stock, and to pay related fees and expenses will be approximately $34.5
million. We expect to obtain the necessary funds from available cash and
working capital. The offer is not conditioned upon any financing being obtained.
Relationships With Motor Cargo
Except as set forth herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of Motor Cargo, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as described herein, there have been no
contacts, negotiations or transactions since December 31, 1997, between us or,
to the best of our knowledge, any of our directors, executive officers or other
affiliates on the one hand, and Motor Cargo or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets. Neither we, nor, to the best of our
knowledge, any of our directors, executive officers or other affiliates has,
since December 31, 1997, had any transaction with Motor Cargo or any of its
executive officers, directors or affiliates that would require disclosure under
the rules and regulations of the SEC applicable to the offer.
Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with accounting principles generally accepted in the
United States of America. For purposes of preparing Union Pacific's
consolidated financial statements, Union Pacific will establish a new
accounting basis for Motor Cargo's assets and liabilities based upon their fair
values, the consideration and the costs of the offer and the merger. Union
Pacific believes that any excess of cost over the fair value of the net assets
of Motor Cargo will be recorded as goodwill and other intangible assets. A
final determination of the intangible asset values and required purchase
accounting adjustments, including the allocation of the purchase price to the
assets acquired and liabilities assumed based on their respective fair values,
has not yet been made. Union Pacific will determine the fair value of Motor
Cargo's assets and liabilities and will make appropriate purchase accounting
adjustments, including adjustments to the amortization period of the intangible
assets, upon completion of that determination.
Fees and Expenses
We have retained Morrow & Co., Inc. as information agent in connection with
the offer. The information agent may contact holders of shares of Motor Cargo
common stock by mail, telephone, telex, telegraph and personal interview and
may request brokers, dealers and other nominee shareholders to forward material
relating to the offer to beneficial owners of shares of Motor Cargo common
stock. We will pay the information agent reasonable and customary compensation
for these services in addition to reimbursing the information agent for its
reasonable out-of-pocket expenses. We have agreed to indemnify the information
agent against certain liabilities and expenses in connection with the offer,
including certain liabilities under the United States federal securities laws.
We have retained Wells Fargo Bank Minnesota, N.A. as the exchange agent. The
exchange agent will be paid reasonable and customary compensation for its
services in connection with the offer and will be reimbursed
37
for its reasonable out-of-pocket expenses from funds furnished by and
originating from Motor Cargo and will be indemnified against certain
liabilities and expenses, including certain liabilities under the United States
federal securities laws.
In addition, we have engaged Morgan Stanley & Co. Incorporated to provide
certain financial advisory services to us in connection with the acquisition of
Motor Cargo. We will pay Morgan Stanley customary compensation for such
services in connection with the offer and the merger. In the event an
acquisition is concluded, we will pay Morgan Stanley a transaction fee of
$975,000.
Motor Cargo's board of directors received an opinion from Morgan Keegan
dated October 15, 2001 substantially to the effect that, as of such date, the
consideration to be received by Motor Cargo shareholders pursuant to the merger
agreement is fair from a financial point of view to the shareholders of Motor
Cargo. The opinion is attached as an exhibit to Motor Cargo's Schedule 14D-9,
which was mailed to the shareholders of Motor Cargo with the preliminary
prospectus. A summary of the report and the opinion provided by Morgan Keegan
to the board of directors of Motor Cargo and details regarding the selection of
Morgan Keegan as financial adviser and arrangements between Motor Cargo and
Morgan Keegan are disclosed in Motor Cargo's Schedule 14D-9.
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares of Motor Cargo
common stock pursuant to the offer. We will reimburse brokers, dealers,
commercial banks and trust companies and other nominees, upon request, for
customary clerical and mailing expenses incurred by them in forwarding offering
materials to their customers.
Stock Exchange Listing
Our common stock is listed on the NYSE under the symbol "UNP." We will
notify the NYSE of our reissuance of previously acquired shares of Union
Pacific common stock that we will issue pursuant to the offer.
38
CERTAIN PROJECTIONS (UNAUDITED)
In the course of Union Pacific's due diligence review of Motor Cargo, Motor
Cargo provided to Union Pacific projections detailing Motor Cargo's forecasts
for certain operational and financial items. These projections were based on
numerous assumptions and management estimates. The actual results may vary
materially from the projections. Information derived from the projections has
been set forth below for the limited purpose of giving shareholders access to
certain projections and other information provided by Motor Cargo's management
to Union Pacific in connection with its due diligence review of Motor Cargo.
In preparing the projections set forth below, Motor Cargo made numerous
assumptions including, without limitation, those assumptions set forth below
the following table. These assumptions were based upon Motor Cargo management's
forecast and estimates of future conditions and reflect numerous assumptions
with respect to general business and economic conditions and other matters
which are inherently uncertain or beyond Motor Cargo's, Union Pacific's or
Merger Subsidiary's control, and do not take into account any changes in Motor
Cargo's operations or capital structure which may result from the offer and the
merger. It is not possible to predict whether the assumptions made in preparing
the projections will be valid, and actual results may prove to be materially
higher or lower than those contained in the projections. The inclusion of
information from the projections should not be regarded as an indication that
Union Pacific or Motor Cargo considered it a reliable predictor of future
events, and this information should not be relied on as such by Motor Cargo's
shareholders. None of Union Pacific, Merger Subsidiary, the exchange agent, the
information agent or any of their respective representatives assumes any
responsibility for the validity, reasonableness, accuracy or completeness of
the projections, and Motor Cargo has made no representations or warranties to
Union Pacific or Merger Subsidiary regarding such information.
Motor Cargo Industries Forecast
2001 2002 2003 2004 2005
---------------- -------- -------- -------- --------
Jan-Aug Sept-Dec
------- --------
(in thousands of dollars)
Revenue.......................... $92,307 $48,000 $154,337 $172,858 $193,601 $216,833
Growth rate................... 7.0% 7.0% 10.0% 12.0% 12.0% 12.0%
Operating ratio.................. 92.6% 92.6% 92.0% 91.0% 91.0% 91.0%
Operating income................. 6,834 3,552 12,347 15,557 17,424 19,515
Interest expense................. (83) (50) (120) (110) (100) (90)
Other income..................... 102 23 168 377 590 830
Income taxes..................... (2,745) (1,375) (4,834) (6,176) (6,986) (7,899)
40.1% 39.0% 39.0% 39.0% 39.0% 39.0%
Net income....................... 4,108 2,150 7,561 9,653 10,928 12,356
Depreciation..................... 5,881 3,072 9,878 11,063 12,390 13,877
Percent of revenue............ 6.4% 6.4% 6.4% 6.4% 6.4% 6.4%
Net changes in working capital... 2,534 (2,000) (1,500) (1,700) (2,000) (2,300)
Capital expenditures............. (8,562) (1,850) (11,000) (12,320) (13,798) (15,454)
Sale of terminals............. -- -- 2,285 -- -- --
Cash provided (used in) financing
activities..................... (6,939) -- -- -- -- --
Net increase (decrease) in cash.. (2,978) 1,372 7,224 6,696 7,520 8,479
--------
Assumptions:
1. The projected revenue growth rate is based on a historical average growth
rate of 10% from 1996 to 2000, and assumes higher growth beginning in 2003
based on expected growth within Motor Cargo's operating region. The highest
annual growth rate experienced by Motor Cargo since 1996 was 16%, in 1997,
and the lowest annual growth rate was 4.7% in 2000.
39
2. The projected operating ratio is based on a historical average operating
ratio of 92.1% from 1996 to 2000, and assumes continued improvement in
operating efficiency. The lowest operating ratio experienced by Motor Cargo
since 1996 was 90.0%, in 1997, and the highest operating ratio was 93.9% in
1999.
3. The projected depreciation expense is based on Motor Cargo's current level
of depreciation expense, from January 1, 2001 through August 31, 2001, as a
percentage of revenues.
4. The projected capital expenditures are based on estimated 2001 capital
expenditures of $10,412,000, with increases to reflect the assumed revenue
growth rate.
5. The projected cash provided by (used in) financing activities is based on
Motor Cargo's historically low borrowings of long-term debt and management's
expectation that significant financing will not be required to finance
future capital expenditures or revenue growth.
6. The projected other income consists primarily of interest income and is
based on the assumed investment of the projected net increase in cash at a
rate of 3% per annum.
Cautionary Statement Concerning Forward-Looking Statements. Certain matters
discussed herein, including without limitation, the projections, are
forward-looking statements that involve risks and uncertainties. Such
information has been included in this prospectus for the limited purpose of
giving Motor Cargo's shareholders access to projections and other information
prepared by Motor Cargo's management that were made available to Union Pacific.
The projections were based on assumptions concerning Motor Cargo's operations
and business prospects in 2001 through 2005, including the assumption that
Motor Cargo would continue to operate under the same ownership structure as
existed at the time the projections were prepared. The projections were also
based on other revenue, expense and operating assumptions. Information of this
type is based on estimates and assumptions that are inherently subject to
significant economic and competitive uncertainties and contingencies, all of
which are also difficult to predict and many of which are beyond Motor Cargo's,
Union Pacific's and Merger Subsidiary's control. Such uncertainties and
contingencies include, but are not limited to, the following factors: economic
factors and fuel price fluctuations, the availability of employee drivers and
independent contractors, risks associated with geographic expansion, capital
requirements, claims exposure and insurance costs, competition and
environmental hazards. Accordingly, there can be no assurance that the
projected results would be realized or that actual results would not be
significantly higher or lower than those set forth above. In addition, the
projections and other forward-looking information were not prepared with a view
to public disclosure or compliance with the published guidelines of the SEC or
the guidelines established by the American Institute of Certified Public
Accountants regarding projections and forecasts, and are included in this
prospectus only because such information was made available to Union Pacific by
Motor Cargo. Neither Union Pacific's, Merger Subsidiary's nor Motor Cargo's
independent accountants have examined, compiled or applied any agreed upon
procedures to this information, and, accordingly, do not express an opinion or
any form of assurance with respect thereto and assume no responsibility for
this information. Neither Union Pacific, Merger Subsidiary nor Motor Cargo
intends to provide any updated information with respect to the projections or
any forward-looking statements except to the extent required by the federal
securities laws.
40
THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the merger agreement but does not purport to describe all the terms of
the agreement. The complete text of the merger agreement is incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC
by Union Pacific on October 16, 2001. All shareholders are urged to read the
merger agreement in its entirety because it is the legal document that governs
the offer and the merger.
The Offer
Terms of the Offer. The merger agreement provides for the commencement of
our offer to exchange all outstanding shares of Motor Cargo common stock for
either 0.26 of a share of Union Pacific common stock or $12.10 in cash, at the
election of the holders of Motor Cargo common stock subject, in each case, to
the election procedure. Shareholders who validly tender their shares of Motor
Cargo common stock but fail to make an election will be deemed to have elected
to receive the $12.10 in cash for each share of Motor Cargo common stock
validly tendered. The obligation of Union Pacific to accept for payment and pay
for shares of Motor Cargo common stock tendered pursuant to the offer is
subject to certain conditions discussed in "The Offer--Conditions of Our Offer"
on page 31.
No fractional shares of Union Pacific common stock will be issued in
connection with the exchange of Union Pacific common stock for Motor Cargo
common stock upon consummation of the offer. In lieu of fractional shares, each
tendering shareholder who would otherwise be entitled to a fractional share of
Union Pacific common stock will be paid an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest such holder would
otherwise be entitled to by (B) the closing price for a share of Union Pacific
common stock as reported on the New York Composite Transaction Tape on the date
Union Pacific accepts shares of Motor Cargo common stock for exchange in the
offer. The cash consideration payable by Union Pacific for each validly
tendered share of Motor Cargo common stock accepted for payment by Union
Pacific will, subject to any required withholding of taxes, be net to the
holder thereof in cash.
Union Pacific may, without the consent of Motor Cargo, extend the offer (A)
for one or more periods beyond the initial expiration date but in no event
ending later than January 31, 2002 if, at the initial or extended expiration
date of the offer, any of the conditions to the offer have not been satisfied
or waived, and (B) for any period required by any rule, regulation,
interpretation or position of the SEC applicable to the offer or any period
required by applicable law. In addition, Union Pacific may elect to provide a
subsequent offering period for 3 business days to 20 business days after the
acceptance of shares of Motor Cargo common stock pursuant to Rule 14d-11
promulgated under the Exchange Act to meet the objective (which is not a
condition to the offer) that there be validly tendered prior to the expiration
date of such subsequent offer and not withdrawn a number of shares of Motor
Cargo common stock, which together with shares of Motor Cargo common stock then
owned by Union Pacific, constitutes at least 90% of the then outstanding shares
of Motor Cargo common stock.
Prompt Payment for Shares of Motor Cargo Common Stock After the Closing of
the Offer. Subject to the conditions of the offer, Union Pacific will accept
for payment and pay for or exchange, as promptly as practicable after the
expiration of the offer, all shares of Motor Cargo common stock validly
tendered and not properly withdrawn pursuant to the offer.
The Merger
The Merger. The merger agreement provides that Motor Cargo will be merged
with and into Merger Subsidiary as soon as practicable following the
satisfaction or waiver of the conditions set forth in the merger agreement, and
Merger Subsidiary will be the surviving corporation. However, if Union Pacific
does not obtain a tax opinion that the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, then, in Union Pacific's reasonable discretion, Merger Subsidiary will be
merged with and into Motor Cargo, and Motor Cargo will be the surviving
corporation.
Under the terms of the merger agreement, at the effective time of the
merger, each share of Motor Cargo common stock will be converted into the right
to receive from Union Pacific the same per share cash
41
consideration paid to holders of Motor Cargo common stock who exchanged their
shares of Motor Cargo common stock in the offer. The merger consideration will
not be payable in respect of shares of Motor Cargo common stock held by Motor
Cargo or Union Pacific.
Going Private. If the share price of Union Pacific common stock exceeds
$46.53 per share and, therefore, the consideration received by Motor Cargo
shareholders who elect to receive stock in the offer exceeds the $12.10 per
share in cash to be received in the merger, the merger will be a
"going-private" transaction within the meaning of Rule 13e-3 under the Exchange
Act. As a result, additional information relating to the negotiations, the
fairness of the consideration to be received in the merger, and related matters
must be filed on Schedule 13E-3 with the SEC. Subsequent to the SEC's review,
if any, of the Schedule 13E-3, an information statement required by Rule 13e-3,
containing such information, must be provided to the Motor Cargo shareholders
at least 20 days before the merger is effective. In such event, the
consummation of the merger will be delayed.
Dissenting Shareholders. The shareholders of Motor Cargo, who have demanded
and perfected their respective rights to dissent from the merger and to be paid
the fair value of their shares of Motor Cargo common stock in accordance with
Part 13 of the URBCA and have not, as of the effective time of the merger,
effectively withdrawn or otherwise lost such dissenters' rights, will not have
their shares converted into or otherwise represent a right to receive cash
consideration but will instead be entitled only to such rights as are granted
by the URBCA. Notwithstanding the immediately preceding sentence, if any holder
of Motor Cargo common stock who demands dissenters' rights with respect to its
shares under the URBCA effectively withdraws or loses its dissenters' rights
through failure to perfect or otherwise, then as of the effective time of the
merger or the occurrence of such event, whichever later occurs, such holder's
shares will automatically be converted into and represent only the right to
receive the cash consideration, without interest thereon, upon surrender of the
certificate or certificates formerly representing such shares of Motor Cargo
common stock.
Exchange Agent. Prior to the effective time of the merger, Union Pacific
will designate a bank or trust company to act as agent for the holders of the
Motor Cargo common stock in connection with the merger to receive in trust, the
aggregate cash consideration to which holders of shares of Motor Cargo common
stock will become entitled pursuant to the merger. The exchange agent will
exchange certificates representing shares of Motor Cargo common stock for the
cash consideration. At the effective time of the merger, Union Pacific will
make available to the exchange agent the cash consideration to be received by
Motor Cargo's shareholders. Soon after completion of the merger, the exchange
agent will mail to each person who was a Motor Cargo shareholder at the
effective time of the merger a letter of transmittal and instructions on how to
surrender their Motor Cargo stock certificates to the exchange agent in
exchange for the cash consideration.
Effective Time of the Merger. The merger will become effective upon the
filing of the articles of merger with the Utah Department of Commerce, Division
of Corporations and Commercial Code or such later time as is agreed by Motor
Cargo and Union Pacific and specified in the articles of merger. The filing of
the articles of merger will take place as soon as practicable after
satisfaction or waiver of the conditions described below under "--Conditions to
the Merger."
Board of Directors and Officers. At and after the effective time of the
merger, the directors of the surviving corporation will be the directors of
Merger Subsidiary prior to the effective time of the merger and the officers of
the surviving corporation will be the officers of Motor Cargo prior to the
effective time of the merger.
Articles of Incorporation and Bylaws. At and after the effective time of
the merger, the articles of incorporation of the surviving corporation will be
as set forth in Exhibit A to the merger agreement and the bylaws of the
surviving corporation will be identical to the bylaws of Merger Subsidiary.
Motor Cargo Board of Directors
Upon the acceptance of shares of Motor Cargo common stock for payment by
Union Pacific pursuant to the offer, Union Pacific will be entitled to
designate such number of directors on the board of directors of Motor Cargo as
is equal to the product, rounded up to the next whole number, obtained by
multiplying the total number
42
of directors on the Motor Cargo board of directors at that time by the
percentage that the number of shares of Motor Cargo common stock then
beneficially owned by Union Pacific bears to the total number of shares of
Motor Cargo common stock then outstanding. Motor Cargo and its board of
directors will, after the acceptance of shares of Motor Cargo common stock by
Union Pacific, immediately increase the size of its board of directors or
secure the resignations of such number of incumbent directors or remove such
number of incumbent directors, to the extent permitted by applicable law, or
any combination of the foregoing, as is necessary to enable Union Pacific's
designees to be appointed to the Motor Cargo board of directors and will cause
Union Pacific's designees to be appointed. Upon the acceptance of shares of
Motor Cargo common stock by Union Pacific pursuant to the offer, Motor Cargo
will, if requested by Union Pacific, also cause directors designated by Union
Pacific to constitute at least the same percentage, rounded up to the next
whole number, of each committee of Motor Cargo's board of directors as is on
Motor Cargo's board of directors after giving effect to the foregoing changes
to the composition of Motor Cargo's board of directors.
The merger agreement provides that Motor Cargo's obligation to appoint Union
Pacific's designees to the Motor Cargo board of directors is subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Motor Cargo
will promptly take all actions required pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its
obligations under the merger agreement, including mailing to shareholders,
together with the Schedule 14D-9, the information required by such Section
14(f) and Rule 14f-1 as is necessary to enable Union Pacific's designees to be
appointed to Motor Cargo's board of directors. Union Pacific will supply Motor
Cargo and be solely responsible for any information with respect to Union
Pacific, its designees and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1.
Notwithstanding the foregoing, there will be, until the effective time of
the merger, at least two members of Motor Cargo's board of directors who are
directors of Motor Cargo prior to consummation of the offer. Following the
appointment of Union Pacific's designees to Motor Cargo's board of directors
and prior to the effective time of the merger, the concurrence of a majority of
the continuing directors then in office will be required for Motor Cargo to:
. amend or terminate the merger agreement;
. extend or waive the time for the performance of any of the obligations or
other acts of Union Pacific or Merger Subsidiary under the merger
agreement; or
. waive any of Motor Cargo's rights under the merger agreement.
Treatment of Motor Cargo Stock Options
The merger agreement provides that each Motor Cargo stock option granted to
an employee, officer or director of Motor Cargo will become fully vested and
exercisable in accordance with the terms of Motor Cargo's option plans. At the
effective time of the merger, each unexercised Motor Cargo stock option
outstanding will be cancelled and the holder thereof will be entitled to
receive as consideration for such cancellation, an amount in cash, net of
applicable withholdings, equal to the excess of (A) the $12.10 cash
consideration over (B) the per share exercise or strike price of such Motor
Cargo stock option multiplied by (C) the number of shares subject to such Motor
Cargo stock option.
Representations and Warranties
The merger agreement contains certain generally reciprocal representations
and warranties made by each party to the other. These generally reciprocal
representations and warranties relate to:
. corporate organization, existence, good standing, power and authority;
. corporate authority to enter into and carry out the obligations of the
merger agreement and the enforceability of the merger agreement;
43
. capitalization;
. absence of a breach of the articles of incorporation, bylaws, law or other
agreements as a result of the transactions contemplated by the merger
agreement;
. governmental consents, approvals, orders and authorizations required in
connection with the transactions contemplated by the merger agreement;
. information provided for inclusion in the Schedule 14D-9 and this
prospectus;
. filings with the SEC;
. financial statements; and
. tax matters.
In addition, Motor Cargo made representations and warranties to Union
Pacific and Merger Subsidiary regarding:
. ownership of subsidiaries;
. shareholder vote required to approve the merger under Utah law, if
necessary;
. absence of certain material changes or events since December 31, 2000;
. absence of undisclosed liabilities;
. employee benefit matters;
. labor matters;
. litigation;
. compliance with laws;
. certain contracts;
. environmental matters;
. intellectual property;
. title, sufficiency and condition of assets;
. transactions with affiliates;
. opinion of financial advisor; and
. broker's or finder's fees.
In addition, Union Pacific and Merger Subsidiary made a representation and
warranty with respect to the availability of funds to finance the offer and the
merger.
The representations and warranties contained in the merger agreement do not
survive the effective time of the merger.
Certain of the representations and warranties are qualified by a material
adverse effect standard. A material adverse effect with respect to Motor Cargo
or Union Pacific and their subsidiaries is any fact, change, event or effect
that, individually or together with other facts, changes, events or effects,
is, or would reasonably be expected to be, materially adverse, in either the
short-term or long-term, to the business, operations, results of operations,
financial condition, assets or liabilities of Motor Cargo or Union Pacific, as
the case may be, and its subsidiaries, taken as a whole, whether related
specifically to Motor Cargo or Union Pacific, as the case may be, or to more
generally applicable facts, changes, events or effects.
44
Covenants
Union Pacific and Motor Cargo have each undertaken certain covenants in the
merger agreement. The following summarizes the more significant of these
covenants.
Interim Operations of Motor Cargo. Motor Cargo has agreed that from the
date of the merger agreement to the effective time of the merger its and its
subsidiaries' business will be conducted only in the ordinary and customary
course consistent with past practice, including, taking all reasonable measures
to protect the confidentiality of its trade secrets, and, to the extent
consistent therewith, Motor Cargo will use reasonable best efforts to preserve
its and its subsidiaries business organization intact and maintain existing
relations with customers, suppliers, employees, creditors and business
partners, except as expressly provided in the merger agreement or with the
prior written consent of Union Pacific, which consent will not be unreasonably
withheld, conditioned, or delayed. Motor Cargo has agreed that it and its
subsidiaries will not, without the prior written consent of Union Pacific,
which consent will not be unreasonably withheld, conditioned, or delayed:
. directly or indirectly, split, combine or reclassify the outstanding
shares of Motor Cargo common stock, or any outstanding capital stock of
any of the subsidiaries of Motor Cargo;
. amend any organizational documents;
. declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock;
. issue, sell, transfer, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class of Motor Cargo or its subsidiaries, other
than issuances pursuant to the exercise of Motor Cargo stock options
outstanding on the date of the merger agreement;
. transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber
any material assets other than in the ordinary and usual course of
business and consistent with past practice, or incur or modify any
material indebtedness;
. redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
. increase the compensation or benefits payable to any director, officer,
other employee or consultant of Motor Cargo or any of its subsidiaries,
other than in the ordinary course of business consistent with past
practice;
. grant any severance or termination pay to, or amend any such existing
arrangement with, any director, officer, other employee or consultant of
Motor Cargo or any of its subsidiaries;
. enter into any employment, deferred compensation or other similar
agreement, or amend any such existing agreement, with any director,
officer, other employee or contractor of Motor Cargo or any of its
subsidiaries;
. increase any benefits payable under any existing severance or termination
pay policies or agreements or employment agreements;
. adopt any new benefit plan, terminate any benefit plan or modify any
benefit plan in a way that could result in additional cost to Union
Pacific, Motor Cargo or any of their respective subsidiaries, except for
any amendments to a benefit plan required to maintain its qualified plan
status under Section 401(a) of the Internal Revenue Code;
. modify any actuarial cost method, assumption or practice used in
determining benefit obligations, annual expense and funding for any
benefit plan, except to the extent required by GAAP;
. subject to any ERISA fiduciary obligation, modify the investment
philosophy of the benefit plan trusts or maintain an asset allocation
which is not consistent with such philosophy;
45
. subject to any ERISA fiduciary obligation, enter into any outsourcing
agreement, or any other material contract relating to the benefit plans or
management of the benefit plan trusts;
. grant any ad hoc pension increase, establish any new or fund any existing
"rabbi" or similar trust, or enter into any other arrangement for the
purpose of securing non-qualified retirement benefits, termination
benefits or deferred compensation;
. modify, amend or terminate certain Motor Cargo agreements or waive,
release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice;
. permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated without notice to Union
Pacific, except in the ordinary course of business and consistent with
past practice;
. incur indebtedness in excess of $500,000, make any loans, advances or
capital contributions to, or investments in, any other person or enter
into any material commitment or transaction requiring a capital
expenditure by Motor Cargo or its subsidiaries;
. change any method of reporting income, deductions or other items for
income tax purposes, make or change any election with respect to taxes,
agree to or settle any claim or assessment in respect of taxes, or agree
to an extension or waiver of the limitation period applicable to any claim
or assessment in respect of taxes, other than in the ordinary course of
business consistent with past practice or as required by law;
. change any of the accounting principles used by Motor Cargo unless
required by GAAP;
. pay, discharge or satisfy any claims, liabilities or obligations other
than the payment, discharge or satisfaction of any such claims,
liabilities or obligations, in the ordinary course of business and
consistent with past practice;
. acquire any corporation, partnership or other business organization or
division thereof or make any investment in another entity;
. sell, dispose of, pledge or encumber or authorize or propose the sale,
disposition, pledge or encumbrance of any assets of Motor Cargo or any of
its subsidiaries, except in the ordinary and customary course of business
consistent with past practice;
. take any action which it believes when taken could reasonably be expected
to adversely affect or delay in any material respect the ability of any of
the parties to the merger agreement to obtain any approval of any
governmental authority required to consummate the transactions
contemplated by the merger agreement;
. take any action to cause shares of Motor Cargo common stock to cease to be
quoted on the Nasdaq National Market prior to the effective time of the
merger;
. take, or agree to commit to take, any action that would make any
representation or warranty of Motor Cargo inaccurate in any respect; and
. enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
No Solicitation. Motor Cargo has agreed to, and will cause its and its
subsidiaries' respective officers, directors, employees, investment bankers,
attorneys, accountants, consultants or other agents, advisors or
representatives to, immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any third
party conducted heretofore by Motor Cargo, its subsidiaries or their respective
officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents, advisors or representatives with respect to any
"acquisition proposal." Motor Cargo has agreed not to, and will
46
cause its and its subsidiaries' respective officers, directors, employees,
investment bankers, attorneys, accountants, consultants or other agents,
advisors or representatives not to, directly or indirectly:
. solicit, initiate or knowingly encourage, including by way of furnishing
information, or knowingly take any other action to facilitate, any
inquiries or the making or submission of any proposal that constitutes, or
may reasonably be expected to lead to, any "acquisition proposal";
. enter into any agreement, arrangement or understanding with respect to any
"acquisition proposal" or enter into any agreement, arrangement or
understanding requiring Motor Cargo to abandon, terminate or fail to
consummate the exchange of shares of Motor Cargo common stock pursuant to
the offer or the merger or any other transaction contemplated by the
merger agreement;
. participate or engage in any discussions or negotiations with, or disclose
or provide any non-public information or data relating to Motor Cargo or
its subsidiaries or afford access to the properties, books or records or
employees of Motor Cargo or its subsidiaries to, any third party relating
to an "acquisition proposal," or knowingly facilitate any effort or
attempt to make or implement an "acquisition proposal" or accept an
"acquisition proposal"; or
. enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
"acquisition proposal."
However, if, at any time prior to the exchange of Motor Cargo common stock
pursuant to the offer:
. Motor Cargo has received an unsolicited bona fide written proposal from a
third party relating to an "acquisition proposal"; and
. Motor Cargo's board of directors concludes in good faith, after
consultation with a financial advisor of nationally recognized reputation
and after receiving the written advice of its outside counsel:
--that such "acquisition proposal" constitutes a "superior proposal"; and
--that the failure to provide such information or participate in such
negotiations or discussions would result in a breach by Motor Cargo's
board of directors of its fiduciary duties to Motor Cargo's shareholders
under applicable law;
Motor Cargo may, subject to its giving Union Pacific at least two business
days' prior written notice of the identity of such third party and all of the
terms and conditions of such "acquisition proposal" and of Motor Cargo's
intention to furnish nonpublic information to, or enter into discussions or
negotiations with, such third party:
. furnish information with respect to Motor Cargo and its subsidiaries to
any third party pursuant to a customary confidentiality agreement
containing terms no less restrictive than the terms of the confidentiality
agreement covering Motor Cargo and Overnite, provided that a copy of all
such information is delivered simultaneously to Union Pacific if it has
not previously been so furnished to Union Pacific; and
. participate in discussions or negotiations regarding such proposal.
An "acquisition proposal" is any inquiry, offer, proposal or intended
proposal, indication of interest, signed agreement or completed action, as the
case may be, by any third party which relates to a transaction or series of
transactions, including any merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination, involving Motor
Cargo or any of its subsidiaries or the issuance or acquisition of shares of
capital stock or other equity securities of Motor Cargo or any of its
subsidiaries representing 15% or more of the voting power of the outstanding
capital stock of Motor Cargo or such subsidiary or any tender or exchange offer
that if consummated would result in any person, together with all affiliates
thereof, beneficially owning shares of capital stock or other equity securities
of Motor Cargo or any of its subsidiaries representing 15% or more of by
47
voting power of the outstanding capital stock of Motor Cargo or such
subsidiary, or the acquisition, license, purchase or other disposition of a
substantial portion of the technology, business or assets of Motor Cargo or any
of its subsidiaries outside the ordinary course of business or inconsistent
with past practice.
A "superior proposal" is any bona fide written "acquisition proposal,"
(provided that for the purposes of this definition, the applicable percentages
in the definition of "acquisition proposal" will be 75% as opposed to 15%), on
its most recently amended or modified terms which Motor Cargo's board of
directors determines in its good faith judgment, after receipt of the advice of
a financial advisor of nationally recognized reputation and receiving advice of
its outside counsel, taking into account, among other things, all legal,
financial, regulatory, timing and other aspects of the proposal and the third
party making the proposal:
. that would, if consummated, result in a transaction that is more favorable
to Motor Cargo's shareholders, from a financial point of view, than the
transactions contemplated by the merger agreement; and
. is reasonably capable of being completed.
Motor Cargo has agreed that it will notify and advise Union Pacific of any
"acquisition proposal" or of any request for information or inquiry that may
lead to an "acquisition proposal," the terms and conditions of such
"acquisition proposal," request or inquiry, and the identity of the person
making such "acquisition proposal," request or inquiry as soon as practicable,
and in any event within 24 hours of receipt of such "acquisition proposal,"
request or inquiry. Motor Cargo has agreed to inform Union Pacific on a prompt
and current basis of the status, content and details of any discussions
regarding, or relating to, any "acquisition proposal" with a third party and,
as promptly as practicable, of any change in the price, structure or form of
the consideration or material terms of and conditions regarding the
"acquisition proposal." In fulfilling its obligations under the merger
agreement, Motor Cargo has agreed to provide Union Pacific copies of all
written correspondence or other written material, including material in
electronic form, between Motor Cargo and such third party, except in the event
where the delivery of such copies would result in a breach by Motor Cargo's
board of directors of its fiduciary duties to Motor Cargo's shareholders under
applicable law.
Covenant to Recommend. Motor Cargo has represented and warranted that its
board of directors unanimously recommended that Motor Cargo's shareholders
accept the offer, tender their shares of Motor Cargo common stock to Union
Pacific and approve and adopt the merger agreement and the merger. Motor Cargo
has agreed not to permit the recommendations of Motor Cargo's board of
directors or any component thereof to be modified in any manner adverse to
Union Pacific or Merger Subsidiary or to be withdrawn, except as provided in
the merger agreement. See "--Modifications of Recommendations of Motor Cargo's
Board of Directors" below.
Motor Cargo has agreed that it will file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 as promptly as
practicable on the date of commencement of the offer, which will contain the
recommendations of Motor Cargo's board of directors which pertain to the merger
agreement and the offer.
Modification of Recommendations of Motor Cargo's Board of Directors. Motor
Cargo has agreed that it will not make a "subsequent determination" with
respect to any of the recommendations of Motor Cargo's board of directors
unless prior to the consummation of the offer, Motor Cargo's board of directors
determines in good faith, after it has received a "superior proposal" and after
receipt of written advice from outside counsel, that the failure to make a
"subsequent determination" would result in a breach by Motor Cargo's board of
directors of its fiduciary duties to Motor Cargo's shareholders under
applicable law. If Motor Cargo's board of directors makes such a determination,
it may inform Motor Cargo's shareholders that it no longer believes that
exchange of Motor Cargo common stock pursuant to the offer and the other
transactions contemplated by the merger agreement are advisable.
Motor Cargo's board of directors may only notify Motor Cargo's shareholders
of such a determination after 5:00 p.m., New York City time, on the third
business day following delivery by Motor Cargo to Union Pacific of a written
notice:
. advising Union Pacific that Motor Cargo's board of directors has received
a "superior proposal";
48
. specifying the terms and conditions of such "superior proposal," including
the amount per share that Motor Cargo's shareholders will receive, valuing
any non-cash consideration at what Motor Cargo's board of directors
determines in good faith, after consultation with its independent
financial advisor, to be the fair value of the non-cash consideration, and
including a copy with all accompanying documentation, except in the event
where the inclusion of such copy would result in a breach by Motor Cargo's
board of directors of its fiduciary duties to Motor Cargo's shareholders
under applicable law;
. identifying the person making such "superior proposal"; and
. stating that Motor Cargo intends to make a "subsequent determination."
After providing such notice, Motor Cargo will provide a reasonable
opportunity to Union Pacific, and will cooperate in good faith with Union
Pacific, to make such adjustments in the terms and conditions of the merger
agreement as would enable Motor Cargo to proceed with the recommendations of
Motor Cargo's board of directors to its shareholders without a "subsequent
determination"; provided, however, that any adjustment to the merger agreement
will be at the discretion of Union Pacific.
A "subsequent determination" occurs if Motor Cargo's board of directors:
. withdraws, qualifies, modifies or amends, or proposes to withdraw,
qualify, modify or amend, in a manner adverse to Union Pacific, the
recommendations of Motor Cargo's board of directors or take any action or
make any statement, filing or release inconsistent with such
recommendations, it being understood that taking a neutral position or no
position with respect to an "acquisition proposal" will be considered an
adverse modification of the recommendations of Motor Cargo's board of
directors;
. approves or recommends, or proposes publicly to approve or recommend, any
"acquisition proposal"; or
. causes Motor Cargo to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
"acquisition proposal".
Covenant to Call Shareholder Meeting and Mail Proxy Statement. If approval
of Motor Cargo's shareholders is required by applicable law in order to
consummate the merger, Motor Cargo has agreed to call a meeting of its
shareholders for the purpose of considering and taking action upon the merger
agreement and the merger. If required by applicable law, promptly after the
acceptance for exchange of the shares of Motor Cargo common stock pursuant to
the offer, Motor Cargo has agreed to prepare and file with the SEC a proxy
statement for the purposes of soliciting proxies to approve and adopt the
merger agreement and the merger and use all reasonable best efforts to have the
proxy statement cleared by the SEC as promptly as practicable. Motor Cargo will
use its reasonable best efforts to solicit from its shareholders proxies in
favor of the merger agreement and the merger and will take all other actions
necessary or advisable to secure the vote or consent of shareholders as may be
required by Utah law to complete the merger. Motor Cargo has agreed to mail the
proxy statement to its shareholders as promptly as practicable after the proxy
statement has cleared the SEC.
Use of Reasonable Best Efforts. Union Pacific and Motor Cargo have agreed
to use reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the offer, the merger,
and the other transactions contemplated by the merger agreement, including:
. the obtaining of all other necessary actions or nonactions, waivers,
consents and approvals from governmental authorities and the making of all
other necessary registrations and filings;
. the obtaining of all necessary consents, approvals or waivers from third
parties;
. the preparation of the offer registration statement, of which this
prospectus forms a part, the offer documents, the Schedule 14D-9 and, if
necessary, the proxy statement; and
. the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, the merger agreement.
49
Notwithstanding the foregoing paragraph:
. neither Union Pacific nor any of its subsidiaries will be required to
divest any of their or Motor Cargo's or any of its subsidiaries'
respective businesses, product lines or assets;
. neither Union Pacific nor any of its subsidiaries will be required to
agree to any limitation that could reasonably be expected to have an
adverse effect on the business, assets, condition (financial or
otherwise), results of operations or prospects of Union Pacific and its
subsidiaries, taken as a whole, or of Union Pacific combined with the
surviving corporation after the effective time of the merger;
. no party will be required to agree to the imposition of or to comply with,
any condition, obligation or restriction on Union Pacific or any of its
subsidiaries or on the surviving corporation or any of its subsidiaries by
a governmental authority;
. neither Union Pacific nor Merger Subsidiary will be required to waive any
of the conditions of the offer or any of the conditions to the merger; and
. no party will be required to pursue or defend any administrative or
judicial action or proceeding that may be instituted or threatened.
Employee Matters. Union Pacific has agreed to cause the surviving
corporation and its subsidiaries to honor and assume certain salary
continuation agreements of Motor Cargo.
Indemnification and Insurance. Union Pacific has agreed that the surviving
corporation will:
. indemnify and hold harmless, and provide advancement of expenses to, all
current or former directors, officers and employees of Motor Cargo and its
subsidiaries to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date of the merger agreement by
Motor Cargo pursuant to Motor Cargo's articles of incorporation, bylaws
and indemnification agreements in existence on the date of the merger
agreement with any directors, officers and employees of Motor Cargo and
its subsidiaries and Utah law and to the fullest extent permitted by law,
in each case for acts or omissions occurring at or prior to the effective
time of the merger, including for acts or omissions occurring in
connection with the approval of the merger agreement and the consummation
of the transactions contemplated by the merger agreement;
. include and cause to be maintained in effect in the surviving
corporation's articles of incorporation and bylaws for a period of six
years after the effective time of the merger, the current provisions
regarding elimination of liability of directors, indemnification of
officers, directors and employees and advancement of expenses contained in
the articles of incorporation and bylaws of Motor Cargo; and
. cause to be maintained for a period of six years after the effective time
of the merger a policy of directors' and officers' liability insurance and
fiduciary liability insurance of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured than the terms currently provided to directors
and officers of Union Pacific with respect to claims arising from facts or
events that occurred on or before the effective time of the merger.
Additional Agreements
Tax Treatment. Union Pacific and Motor Cargo have agreed to use their
reasonable best efforts to cause the transaction to qualify, and will not take
any actions or cause any actions to be taken which could reasonably be expected
to prevent the transaction from qualifying, as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code.
Fees and Expenses. Except for the termination fee discussed below, the
exchange agent's fees and expenses, which will be paid by Motor Cargo, and the
HSR Act filing fee, which will be paid by Union Pacific, Union Pacific and
Motor Cargo have agreed that all fees and expenses incurred in connection with
the offer and the merger, the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring such
fees or expenses, whether or not the offer or the merger is consummated.
50
Conditions of the Offer
See "The Offer--Conditions of Our Offer" on page 31.
Conditions to the Merger
The obligations of Union Pacific, Merger Subsidiary and Motor Cargo to
consummate the merger are subject to the satisfaction of the following
conditions:
. approval and adoption of the merger agreement and the merger by Motor
Cargo's shareholders, if required by Utah law;
. no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction has been enacted, entered, promulgated or enforced
by any governmental authority which prohibits or prevents the consummation
of the merger; and
. Union Pacific has purchased the shares of Motor Cargo common stock
pursuant to the offer.
In addition, the obligations of Union Pacific and Merger Subsidiary to
effect the merger are subject to the condition that Motor Cargo will have
performed and complied with, in all material respect, all of its covenants and
agreements required by the merger agreement to be performed or complied with or
satisfied by Motor Cargo at or prior to the effective time of the merger.
Termination of the Merger Agreement
Termination by Mutual Consent. The merger agreement may be terminated at
any time prior to the effective time of the merger by mutual written consent of
Union Pacific and Motor Cargo.
Termination by Either Union Pacific or Motor Cargo. The merger agreement
may be terminated by either Union Pacific or Motor Cargo if:
(1) the offer has expired or been terminated in accordance with the terms of
the merger agreement without Union Pacific or Merger Subsidiary having
accepted for exchange any shares of Motor Cargo common stock pursuant to
the offer, unless the failure to consummate the offer is the result of a
material breach of the merger agreement by the party seeking to
terminate the merger agreement;
(2) the offer has not been consummated on or before January 31, 2002, unless
the failure to consummate the offer is the result of a material breach
of the merger agreement by the party seeking to terminate the merger
agreement;
(3) the merger has not been consummated on or prior to April 30, 2002,
provided, however, that the right to terminate the merger agreement for
this reason will not be available to any party whose willful and
material breach of the merger agreement results in the failure of the
merger to be consummated by such time;
(4) the merger has not been consummated as a result of any conditions to the
merger being incapable of being satisfied;
(5) any statute, rule, regulation, judgment, order, legislation or
interpretation of any nature enacted, enforced, promulgated, amended or
issued by any governmental authority or any judgment, order, injunction,
ruling, proceeding, action, suit, charge or decree is in effect that:
(A) challenges or seeks to make illegal, delays materially or otherwise
directly or indirectly restrains or prohibits or makes materially
more costly the making of the offer, the acceptance for exchange of,
or the exchange or delivery of the offer consideration for, some of
or all the shares of Motor Cargo common stock by Union Pacific or the
consummation of the merger;
51
(B) seeks to obtain material damages or otherwise directly or indirectly
relating to the transactions contemplated by the merger agreement,
the offer or the merger;
(C) seeks to limit, restrain or prohibit Union Pacific's or Merger
Subsidiary's ownership or operation of all or any portion of Motor
Cargo or Union Pacific or to compel Union Pacific to dispose of or
hold separate all or any portion of Motor Cargo or Union Pacific;
(D) seeks to impose or confirm limitations on the ability of Union
Pacific effectively to exercise full rights of ownership of any
shares of Motor Cargo common stock, including the right to vote any
shares of Motor Cargo common stock to be acquired pursuant to the
offer or owned by Union Pacific on all matters presented to Motor
Cargo's shareholders, or seeks to require divestiture by Union
Pacific of any shares of Motor Cargo common stock; or
(E) has, or would reasonably be expected to have, a material adverse
effect on Union Pacific or Motor Cargo; or
(6) there has been any action taken, or any statute, rule, regulation,
judgment, order, legislation or interpretation of any nature pending,
proposed, enacted, enforced, promulgated, amended or issued by any
governmental authority or deemed by any governmental authority
applicable to (i) Union Pacific, Motor Cargo or any of their
subsidiaries or affiliates or (ii) any transac-tion contemplated by the
merger agreement, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (A)
through (E) immediately above.
Termination by Union Pacific. The merger agreement may be terminated by
Union Pacific if:
. Motor Cargo received an "acquisition proposal," and at any time prior to,
or within nine months after, the termination of the merger agreement
(unless the merger agreement is terminated by mutual consent or because of
the reasons set forth in clauses (5) or (6) above in "--Termination by
Either Union Pacific or Motor Cargo"), Motor Cargo has entered into, or
has publicly announced its intention to enter into, an agreement or an
agreement in principle with respect to any "acquisition proposal";
. any third party becomes the beneficial owner of at least 15% of the
outstanding shares of Motor Cargo common stock or has acquired, directly
or indirectly, at least 15% of the assets of Motor Cargo and its
subsidiaries;
. there has been a willful and material breach or failure to perform in any
material respect by Motor Cargo of any of its representations, warranties,
covenants or other agreements contained in the merger agreement, which
breach or failure to perform:
--would give rise to the failure of the conditions of the offer that:
. Motor Cargo will perform in any material respect any obligation under
the merger agreement or to comply in any material respect with any
agreement or covenant of Motor Cargo to be performed or complied with
by it; or
. the representations and warranties of Motor Cargo that are qualified
as to materiality be true and correct as so qualified in all respects
as of the date of the merger agreement and as of the expiration of the
offer, or any of the representations and warranties set forth in the
merger agreement that are not so qualified not be true and correct in
any material respect as of the date of the merger agreement and as of
the expiration of the offer; or
--is incapable of being or has not been cured by Motor Cargo prior to or
on the earlier of the date which is 10 business days immediately
following written notice by Union Pacific to Motor Cargo of such breach
or failure to perform and the expiration or termination of the offer;
. Motor Cargo has provided Union Pacific with a subsequent determination
notice or Motor Cargo's board of directors:
--makes a "subsequent determination";
52
--fails to include in the Schedule 14D-9 its recommendations without
modification or qualification in a manner adverse to Union Pacific;
--fails to reaffirm such recommendations within two business days upon
Union Pacific's reasonable request to do so; or
--has resolved to, or publicly announced an intention to, take any of the
foregoing actions or omit to take any foregoing action;
. as of the final expiration date of the offer, all conditions to the
consummation of the offer have been met or waived except for satisfaction
of the minimum condition and there has been made subsequent to the date of
the merger agreement an "acquisition proposal"; or
. there has been a change in the constitution of Motor Cargo's board of
directors not provided for in the merger agreement such that at least a
majority of the members of Motor Cargo's board of directors is comprised
of individuals not serving on Motor Cargo's board of directors as of the
date of the merger agreement.
Termination by Motor Cargo. The merger agreement may be terminated by Motor
Cargo if Motor Cargo makes a subsequent determination in compliance with the
terms of the merger agreement, provided Motor Cargo has paid Union Pacific the
termination fee as describe below in "--Termination Fees."
Termination Fees
Motor Cargo has agreed to pay Union Pacific liquidated damages in the amount
of $5,000,000 in the event the merger agreement is terminated by Union Pacific
for any of the reasons listed in "--Termination of the Merger
Agreement--Termination by Union Pacific" or if the merger agreement is
terminated by Motor Cargo for the reason set forth in "--Termination of the
Merger Agreement--Termination by Motor Cargo."
Union Pacific and Merger Subsidiary have agreed that, except in the event of
a willful and material breach of the merger agreement by Motor Cargo, with
respect to any termination of the merger agreement where Union Pacific is paid
the $5,000,000, the payment of the $5,000,000 will constitute liquidated
damages with respect to any and all claims for damages and any and all other
claims which Union Pacific or Merger Subsidiary may be entitled to assert
against Motor Cargo. The right to receive payment of the $5,000,000 will
constitute the sole and exclusive remedy available to Union Pacific or Merger
Subsidiary for any and all termination damages.
Amendments and Waiver
The merger agreement may be amended by action taken by Union Pacific, Merger
Subsidiary and Motor Cargo at any time prior to the effective time of the
merger. Any failure of Motor Cargo on the one hand, or Union Pacific and Merger
Subsidiary on the other hand, to comply with any obligation, covenant,
agreement or condition in the merger agreement may be waived by Union Pacific
on the one hand, or Motor Cargo on the other hand, by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
will not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
The merger agreement provides that, following the appointment of any
directors selected by Union Pacific and prior to the effective time of the
merger, any amendment of the merger agreement, any termination of the merger
agreement by Motor Cargo, any extension by Motor Cargo of the time for the
performance of any of the obligations or other acts of Union Pacific or waiver
of any of Motor Cargo's rights under the merger agreement will require the
concurrence of a majority of the Motor Cargo directors then in office who were
not designated by Union Pacific.
53
SHAREHOLDER AGREEMENTS
The following description of the shareholder agreements describes the
material terms of the agreements but does not purport to describe all the terms
of the agreements. The complete text of the shareholder agreements are
incorporated by reference to Exhibit 99.2 and 99.3 to the Current Report on
Form 8-K filed with the SEC by Union Pacific on October 16, 2001. All
shareholders are urged to read the shareholder agreements in their entirety.
As a condition to the willingness of Union Pacific and Merger Subsidiary to
enter into the merger agreement, Union Pacific and Merger Subsidiary required
that Harold R. Tate and Marvin L. Friedland, each a principal shareholder of
Motor Cargo, enter into the shareholder agreements. Mr. Tate and Mr. Friedland
own 3,858,000 shares and 188,153 shares, respectively of Motor Cargo common
stock which represents approximately 59.6% and 2.9%, respectively, of the
shares of Motor Cargo common stock outstanding as of October 26, 2001 and
approximately 56.5% and 2.8%, respectively, of the outstanding shares of Motor
Cargo common stock on a fully diluted basis.
Tender of Shares of Motor Cargo Common Stock
The shareholder agreements provide that the principal shareholders will
promptly, and in any event within 10 business days, tender the shares of Motor
Cargo common stock held by them following the commencement of the offer and,
subject to certain exceptions relating to Mr. Friedland described below, elect
to receive Union Pacific common stock in exchange for their shares of Motor
Cargo common stock.
Voting Agreement and Proxy
The shareholder agreements provide that during the time the shareholder
agreements are in effect, the principal shareholders will vote, or cause to be
voted, or consent, or cause to be consented, at any meeting or in connection
with any written consent of Motor Cargo shareholders or in any other
circumstances in which a vote, consent or approval of any of the Motor Cargo
shareholders their shares of Motor Cargo common stock:
. in favor of the merger, the merger agreement and the other transactions
contemplated by the merger agreement;
. against any other merger agreement, merger, consolidation, combination,
sale or issuance of securities, sale or other disposition of substantial
assets, spin-off, reorganization, recapitalization, dissolution,
liquidation or winding up of, by or involving Motor Cargo or any of its
subsidiaries;
. against any "acquisition proposal"; and
. against any amendment or modification of the articles of incorporation or
bylaws of Motor Cargo or of any of its subsidiaries or other proposal or
transaction involving Motor Cargo or any of its subsidiaries which is
reasonably likely to, in any manner, directly or indirectly, materially
impair the ability of Union Pacific, Merger Subsidiary or Motor Cargo to
consummate, or to prevent or materially delay the consummation of, the
offer, the merger or the other transactions contemplated by the merger
agreement.
Pursuant to the shareholder agreements, the principal shareholders granted
Union Pacific an irrevocable proxy with respect to their shares of Motor Cargo
common stock to vote:
. in favor of the merger, the merger agreement, the shareholder agreements
and the other transactions contemplated by the merger agreement and the
shareholder agreements;
54
. against any matter that the principal shareholders are prohibited from
voting for or consenting to as described above or any other action or
agreement that would result in a breach or inaccuracy of, or failure to
fulfill, any covenant, representation, warranty, obligation or agreement
of Motor Cargo under the merger agreement; and
. in favor of any other matter necessary for the consummation of the offer
and the other transactions contemplated by the merger agreement and the
shareholder agreements.
Representations and Warranties
In the shareholder agreements, the principal shareholders made customary
representations and warranties to Union Pacific, including representations and
warranties relating to:
. authority to enter into and carry out the obligations of the shareholder
agreements and the enforceability of the shareholder agreements;
. ownership of their shares of Motor Cargo common stock;
. absence of a need for governmental consents, violation of any laws or
conflicts with contracts or laws;
. broker's or finder's fees;
. absence of a "group" as defined in the Exchange Act; and
. tax matters relating to the offer and the merger.
Covenants
The shareholder agreements contain various covenants of the principal
shareholders, including the following:
. the principal shareholders covenant and agree:
--that they have not entered into any voting agreement, voting trust or
similar understanding or obligation, whether written or oral, with
respect to any of their shares of Motor Cargo common stock, or that any
voting agreement, voting trust, proxy or power of attorney they have
previously entered into or granted with respect to their shares of Motor
Cargo common stock has expired or been revoked or terminated;
--that they will not enter into any voting agreement or voting trust or
grant a proxy or power of attorney with respect to any of their shares
of Motor Cargo common stock; and
--that they will use their reasonable best efforts to cause the offer and
the merger to qualify as a reorganization within the meaning of Section
368(a) of the Code;
. the principal shareholders agree not to, directly or indirectly:
--donate, pledge, encumber, issue, sell, transfer, assign, or otherwise
dispose of, in any manner, to any person, or enter into any contract,
agreement, commitment, option or other arrangement with respect to the
transfer of, any of their shares of Motor Cargo common stock;
--grant any proxy or enter into any contract, including any voting
arrangement relating to any of their shares of Motor Cargo common stock;
--change, modify or alter in any manner, or agree to change, modify or
alter in any manner, the beneficial ownership of any of their shares of
Motor Cargo common stock; or
--seek, solicit, commit or agree to take any of the actions described
above;
. the principal shareholders agree that they will, and will cause their
employees, investment bankers, attorneys, accountants, consultants or
other agents, advisors or representatives to, immediately cease and
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any third party conducted by the principal
shareholders or their employees, investment bankers, attorneys,
55
accountants, consultants or other agents, advisors or representatives with
respect to any "acquisition proposal";
. the principal shareholders will not, and will cause their officers,
directors, employees, investment bankers, attorneys, accountants,
consultants or other agents, advisors or representatives not to, directly
or indirectly:
--solicit, initiate or knowingly encourage, including by way of furnishing
information, or knowingly take any other action to facilitate, any
inquiries or the making or submission of any proposal that constitutes,
or may reasonably be expected to lead to, any "acquisition proposal";
--enter into any agreement, arrangement or understanding with respect to
any "acquisition proposal" or enter into any agreement, arrangement or
understanding requiring the principal shareholders to abandon, terminate
or fail to consummate the exchange of their shares of Motor Cargo common
stock pursuant to the offer or the merger or any other transaction
contemplated by the shareholder agreements;
--participate or engage in any discussions or negotiations with any third
party relating to an "acquisition proposal," or knowingly facilitate any
effort or attempt to make or implement an "acquisition proposal" or
accept an "acquisition proposal"; or
--enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
"acquisition proposal";
. the principal shareholders will use their best efforts to take, or cause
to be taken, all actions, execute and deliver all instruments, and do,
cause to be done, and assist and cooperate with Motor Cargo, Union Pacific
and Merger Subsidiary in doing, all things necessary, proper or advisable
to consummate and effect completely, in the most expeditious manner
practicable, the offer, the merger, the merger agreement, the shareholder
agreements and the other transactions contemplated by the merger agreement
and shareholder agreements, except, in their capacities as a director or
officer of Motor Cargo, to the extent as otherwise permitted by the merger
agreement;
. the principal shareholders agree to notify Union Pacific of any
acquisition by them of any capital shares or securities of Motor Cargo
acquired directly or indirectly by them on or after the date of the
shareholder agreements; and
. the principal shareholders make various covenants as to tax matters
relating to the offer and the merger.
Termination
The shareholder agreements terminate, including the proxies granted
thereunder, on the earliest of (1) the payment for all of the principal
shareholder's shares of Motor Cargo common stock pursuant to the offer by Union
Pacific or (2) termination of the merger agreement pursuant to its terms.
However, in any event, the shareholder agreements will terminate no later than
the first anniversary of the date of their signing, other than sections
relating to tax matters which will not terminate as described above, but will
survive any termination.
Restrictions Imposed by Margin Accounts
Mr. Friedland is not required to take any action or make any election which
conflicts with his existing contractual obligations imposed by margin accounts
he maintains. Similarly, all representations and warranties are qualified in
their entirety by the terms and conditions of the margin accounts.
56
INTERESTS OF CERTAIN PERSONS
The information contained in the Information Statement attached as Annex I
to the Schedule 14D-9 of Motor Cargo dated October 31, 2001 is incorporated
herein by reference. Each material agreement, arrangement or understanding and
any actual or potential conflict of interest between Motor Cargo or its
affiliates and Motor Cargo's executive officers, directors or affiliates, or
between Motor Cargo or its affiliates and Union Pacific or their respective
executive officers, directors or affiliates, is either incorporated herein by
reference as a result of the previous sentence or set forth below.
When considering the recommendation of Motor Cargo's board of directors, you
should be aware that certain of the Motor Cargo directors and officers may have
interests in the merger that are different from or are in addition to your
interests.
Salary Continuation Agreements. Motor Cargo has salary continuation
agreements with four of its key management employees: Marvin L. Friedland,
Louis V. Holdener, Lynn H. Wheeler and Steven E. Wynn. Under the salary
continuation agreements, Motor Cargo is obligated to provide for each such
employee or his beneficiaries, during a period of not more than ten years after
the employee's death, disability or retirement, annual benefits ranging from
$17,000 to $23,000. Pursuant to the merger agreement, Union Pacific has agreed
to cause the surviving corporation and its subsidiaries to honor and assume the
salary continuation agreements. Motor Cargo's current liability under each
agreement is as follows: Marvin L. Friedland, $156,760; Louis V. Holdener,
$156,710; Lynn H. Wheeler, $150,386; and Steven E. Wynn, $77,318.
Stock Options. The merger agreement provides that each Motor Cargo stock
option granted to an employee, officer or director of Motor Cargo will become
fully vested and exercisable in accordance with the terms of Motor Cargo's
option plans. At the effective time of the merger, each unexercised outstanding
Motor Cargo stock option outstanding will be cancelled and the holder thereof
will be entitled to receive as consideration for such cancellation, an amount
in cash, net of applicable withholdings, equal to the excess of (A) the $12.10
cash consideration over (B) the per share exercise or strike price of such
Motor Cargo stock option multiplied by (C) the number of shares subject to such
Motor Cargo stock option.
Indemnification and Insurance. Union Pacific has agreed that the surviving
corporation will:
. indemnify and hold harmless, and provide advancement of expenses to, all
current or former directors, officers and employees of Motor Cargo and its
subsidiaries to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date of the merger agreement by
Motor Cargo pursuant to Motor Cargo's articles of incorporation, bylaws
and indemnification agreements in existence on the date of the merger
agreement with any directors, officers and employees of Motor Cargo and
its subsidiaries and Utah law and to the fullest extent permitted by law,
in each case for acts or omissions occurring at or prior to the effective
time of the merger, including for acts or omissions occurring in
connection with the approval of the merger agreement and the consummation
of the transactions contemplated by the merger agreement;
. include and cause to be maintained in effect in the surviving
corporation's articles of incorporation and bylaws for a period of six
years after the effective time of the merger, the current provisions
regarding elimination of liability of directors, indemnification of
officers, directors and employees and advancement of expenses contained in
the articles of incorporation and bylaws of Motor Cargo; and
. cause to be maintained for a period of six years after the effective time
of the merger a policy of directors' and officers' liability insurance and
fiduciary liability insurance of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured than the terms currently provided to directors
and officers of Union Pacific with respect to claims arising from facts or
events that occurred on or before the effective time of the merger.
As a result of the agreements and arrangements discussed in this section,
these directors and officers could be more likely to support and/or vote to
approve the merger agreement than if they did not hold these interests. Motor
Cargo shareholders should consider whether these interests may have influenced
these directors and officers to support or recommend the offer and the merger.
57
INFORMATION ABOUT UNION PACIFIC
Union Pacific
Union Pacific is a Utah corporation incorporated in 1969. We operate
primarily in the areas of rail transportation, through our subsidiary Union
Pacific Railroad Company, and trucking, through our subsidiary Overnite
Transportation Company.
Rail Transportation. Union Pacific Railroad is the largest rail system in
the United States, operating nearly 34,000 route miles linking Pacific Coast
and Gulf Coast ports to the Midwest and eastern United States gateways, and
providing several north/south corridors to key Mexican gateways. Union Pacific
Railroad serves the western two-thirds of the country and maintains coordinated
schedules with other carriers for the handling of freight to and from the
Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada and
Mexico. Export and import traffic is moved through Gulf Coast and Pacific Coast
ports and across Mexican and, primarily through interline connections, Canadian
borders. Major commodities hauled by Union Pacific Railroad are agricultural,
automotive, chemicals, energy (primarily coal), industrial products and
intermodal.
Since 1995, we have significantly expanded our rail operations, completing
acquisitions of Chicago and North Western Transportation Company and Southern
Pacific Transportation Company and their respective affiliated railroads.
Currently, Union Pacific Railroad holds a 26% ownership interest in a
50-year concession for the Pacific North and Chihuahua Pacific rail lines in
Mexico.
Trucking. Overnite, a major interstate trucking company specializing in
less-than-truckload shipments, serves all 50 states and portions of Canada and
Mexico through 167 service centers located throughout the United States.
Overnite transports a variety of products, including machinery, tobacco,
textiles, plastics, electronics and paper products.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Union Pacific are set forth in Annex A.
Additional Information
A detailed description of Union Pacific's business, financial statements and
other matters related to Union Pacific is incorporated by reference in this
prospectus from materials filed by Union Pacific with the SEC, including Union
Pacific's Annual Report on Form 10-K for the year ended December 31, 2000,
Quarterly Reports on Forms 10-Q for the quarters ended September 30, 2001, June
30, 2001 and March 31, 2001 and Current Reports on Form 8-K filed October 18,
2001, October 16, 2001, July 19, 2001, April 26, 2001, March 8, 2001 and
January 18, 2001. Shareholders desiring copies of such documents may obtain
such copies as described under the captions "Additional Information" on the
page preceding the table of contents and "Where You Can Find More Information"
on page 82.
58
INFORMATION ABOUT MOTOR CARGO
Motor Cargo
Motor Cargo is a Utah corporation incorporated in 1996. Motor Cargo is a
regional less-than-truckload, or LTL, carrier that provides transportation and
logistics services to shippers within the western United States, including
Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah
and Washington. Motor Cargo transports general commodities, including consumer
goods, packaged foodstuffs, electronics, computer equipment, apparel, hardware,
industrial goods and auto parts for a diversified customer base. Motor Cargo
offers a broad range of services, including expedited scheduling and full
temperature-controlled service. Through its wholly-owned subsidiary, MC
Distribution Services, Inc., Motor Cargo also provides customized logistics,
warehousing and distribution management services.
The LTL Industry. Motor Cargo transports primarily LTL shipments. LTL
shipments are shipments weighing less than 10,000 pounds. Generally, LTL
carriers transport freight from multiple shippers to multiple consignees on a
scheduled basis. Unlike truckload carriers, LTL carriers typically do not
transport full trailer loads directly from origin to destination. LTL
operations require the handling of shipments in several coordinated stages.
Specialized Services. Motor Cargo offers a broad range of services,
including service capabilities beyond the scope of most LTL carriers. These
services include Priority+Plus, an expedited time-definite service;
Protective+Plus, a full temperature-controlled service for LTL shipments within
Motor Cargo's service region; Canadian+Plus, full points coverage into all
major Canadian markets through an exclusive regional marketing partnership with
one of Canada's leading LTL carriers and Truckload+Plus, a specialized
truckload service designed to meet the truckload needs of its customers at
competitive rates. Motor Cargo also provides less-than-container load service
to Hawaii. Motor Cargo consolidates shipments, loads containers and tenders
them to a major transoceanic carrier for transport to Hawaii. The shipments are
then delivered by a local carrier in Hawaii pursuant to an agreement between
the carrier and Motor Cargo.
In addition to the service offerings described above, Motor Cargo offers
customized services tailored to the ongoing needs of a particular customer.
These customized services often involve a high level of coordination between
Motor Cargo and the customer and may include time definite delivery, highly
specialized reporting requirements and electronic data interchange, full-time
on-site loading by Motor Cargo employees, return goods consolidation and
management and specialized handling and equipment requirements.
Through a program referred to as "Motor Cargo USA," Motor Cargo also
provides customers with service to points outside its core service region.
Motor Cargo enters into interline agreements with other carriers to provide
delivery of freight outside of Motor Cargo's core service region.
Motor Cargo provides customized logistics, warehousing and distribution
management services through its subsidiary MC Distribution Services. MC
Distribution Services currently provides "just-in-time" delivery services for a
small number of specialty retailers.
59
MOTOR CARGO'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The purpose of this section is to discuss and analyze Motor Cargo's
consolidated financial condition, liquidity and capital resources and results
of operations. This analysis should be read in conjunction with the
consolidated financial statements and related notes which appear beginning on
page F-1. This section contains certain forward-looking statements that involve
risks and uncertainties, including statements regarding Motor Cargo's plans,
objectives, goals, strategies and financial performance. Motor Cargo's actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of factors set forth under "Motor
Cargo's Cautionary Statement for Forward-Looking Statements" on page 65.
Results Of Operations
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in Motor Cargo's statements of
earnings:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ----------------
2001 2000 2001 2000
----- ----- ----- -----
Operating revenues.................. 100.0% 100.0% 100.0% 100.0%
Operating expenses..................
Salaries, wages and benefits..... 50.1 49.6 51.4 49.8
Operating supplies and expenses.. 15.6 16.6 16.0 16.4
Purchased transportation......... 8.8 8.8 8.4 9.2
Operating taxes and licenses..... 3.8 3.9 3.8 3.9
Insurance and claims............. 3.0 2.5 2.8 2.7
Depreciation and amortization.... 6.2 6.3 6.4 6.9
Communications and utilities..... 1.4 1.7 1.5 1.6
Building rents................... 2.1 2.6 2.2 2.7
Gain on sale of equipment........ (0.1) (0.2) -- (0.2)
Other non-recurring expense...... -- -- -- 0.1
----- ----- ----- -----
Total operating expenses..... 90.8 91.8 92.5 93.1
----- ----- ----- -----
Operating income............. 9.2 8.2 7.5 6.9
Other income (expense)..............
Interest expense................. (0.1) (0.1) (0.1) (0.1)
Other, net....................... 0.1 0.1 0.1 0.1
----- ----- ----- -----
Earnings before income taxes........ 9.2 8.2 7.5 6.9
Income taxes........................ 3.7 3.2 3.0 2.7
----- ----- ----- -----
Net earnings........................ 5.6 5.0 4.5 4.2
===== ===== ===== =====
Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000
Operating revenues increased 5.7% to $36.0 million for the three months
ended September 30, 2001, compared to $34.1 million for the same period in
2000. The increase was primarily attributable to increased tonnage from
existing and new customers. The tonnage hauled during the third quarter of 2001
increased 4.7% to 151,480 tons, compared to 144,747 tons for the same quarter
of 2000. The number of shipments during the third quarter of 2001 remained flat
at 249,430, compared to 249,200 for the third quarter of 2000. The average
revenue per shipment increased to $139 for the third quarter of 2001, compared
to $133 for the same quarter of 2000.
Revenues contributed by MC Distribution Services increased 30.7% to
$1,527,000 for the third quarter of 2001, compared to $1,168,000 for the third
quarter of 2000. The increase was due primarily to increased volume from
existing customers.
60
As a percentage of operating revenues, salaries, wages and benefits
increased to 50.1% for the third quarter of 2001 from 49.6% for the third
quarter of 2000. This increase of 0.5 percentage points was primarily the
result of increased cost of benefits to employees.
Purchased transportation remained unchanged at 8.8% of revenues for the
three months ended September 30, 2001 as compared to the same period in 2000.
Operating supplies and expenses decreased to 15.6% of operating revenues for
the quarter ended September 30, 2001, compared to 16.6% for the same period in
2000. Cost savings associated with lower fuel prices represented approximately
0.7% of revenue for the third quarter of 2001. An additional decrease in
operating supplies and expenses resulted from a decrease in commissions to
agents due to the conversion of two independent agent facilities to Motor
Cargo-operated service centers during the fourth quarter of 2000.
Insurance and claims expense increased to 3.0% of revenue for the third
quarter of 2001 compared to 2.5% for the same quarter 2000. This increase was
attributable to an increase in premiums for re-insurance, as well as increased
charges related to liability claims for which Motor Cargo is self-insured.
Building rents decreased to 2.1% of revenue for the third quarter of 2001,
compared to 2.6% for the same quarter of 2000. This decrease was due primarily
to payments during 2000 for leases of unused facilities in Chicago, Illinois,
Benicia, California and Boise, Idaho, which have since terminated.
Total operating expenses decreased to 90.8% of operating revenues for the
three months ended September 30, 2001 from 91.8% for the same period in 2000.
Net earnings, increased 16.8% to $2.0 million ($0.31 per weighted average
diluted share) for the three months ended September 30, 2001, compared to $1.7
million ($0.26 per weighted average diluted share) for the same period in 2000.
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September
30, 2000
Operating revenues increased 7.8% to $103.7 million for the nine months
ended September 30, 2001, compared to $96.3 million for the same period in
2000. The increase was attributable to increased tonnage. Tonnage increased
7.4% to 438,386 tons for the nine months ended September 30, 2001, compared to
408,087 tons for the same period of 2000. The number of shipments during the
nine months ended September 30, 2001 increased 1.0% to 731,800, compared to
724,870 for the same period in 2000. Revenue per shipment increased 6.2% to
$137, compared to $129 in 2000.
Revenues for MC Distribution Services increased 23.5% to $4.2 million for
the nine months ended September 30, 2001 from $3.4 million for the same period
in 2000. The increase was due primarily to increased volume from two customers.
As a percentage of operating revenues, salaries, wages and benefits
increased to 51.4% for the nine months ended September 30, 2001, from 49.8% for
the same period of 2000. This increase of 1.6 percentage points was due
primarily to an increase in employee wages and benefits associated with
shifting to the use of more Motor Cargo drivers and less use of purchased
transportation. The use of more Motor Cargo drivers resulted in a reduction in
the expense incurred by Motor Cargo for purchased transportation. In addition,
group medical expenses increased approximately 0.7% of revenue during the first
nine months of 2001, compared to 2000. The increase was primarily attributable
to the addition of more Motor Cargo line drivers, an increase in insurance
premiums and an overall increase in claims expense. Also a charge of
approximately $281,000, or 0.3% of revenue, to reflect appreciation in Motor
Cargo's stock price under variable stock option accounting treatment, also
contributed to the increase in salaries, wages and benefits.
Purchased transportation decreased to 8.4% of revenues for the nine months
ended September 30, 2001 as compared to 9.2% for the same period in 2000. A
reduction of 0.8 percentage points was attributable to the replacement of a
portion of purchased transportation with Motor Cargo drivers and equipment.
Corresponding
61
increases were incurred in expense categories related to drivers and equipment
such as wages, benefits, operating supplies and expenses, licenses and taxes.
The reduction in purchased transportation resulting from the increased use of
Motor Cargo drivers and equipment was partially offset by an increase in
purchased transportation, as a percentage of revenues, of approximately 0.6
percentage points, which was attributable to the lease of trailers under a
long-term lease arrangement.
Operating supplies and expenses decreased to 16.0% of operating revenues for
the nine months ended September 30, 2001 as compared to 16.4% for the same
period in 2000. The principal reason for the decline was the conversion of two
independent agent facilities to Motor Cargo-operated service centers during the
fourth quarter of 2000.
Building rents decreased to 2.2% of revenue for the nine months ended
September 30, 2001 as compared to 2.7% for the same period of 2000. This
decrease was due primarily to payments during 2000 for leases of unused
facilities in Chicago, Illinois, Benicia, California and Boise, Idaho, which
have now terminated.
Total operating expenses decreased to 92.5% of operating revenues for the
nine months ended September 30, 2001 from 93.1% for the same period in 2000.
Net earnings, before the special charge of approximately $281,000 for
variable stock options, increased 22.5% to $4,926,000 ($0.76 per weighted
average diluted share) for the nine months ended September 30, 2001, compared
to $4,022,000 ($0.59 per weighted average diluted share) for the same period in
2000. After the charge of $281,000 for the treatment of variable options, net
earnings was reduced to $4,645,000 ($0.71 per weighted average diluted share).
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
Year ended December 31,
----------------------
2000 1999 1998
----- ----- -----
Operating revenues.................. 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and benefits..... 49.7 47.5 45.1
Operating supplies and expenses.. 16.6 16.2 13.9
Purchased transportation......... 9.0 12.5 15.7
Depreciation and amortization.... 6.7 7.0 6.9
Insurance and claims............. 2.6 3.1 3.2
Operating taxes and licenses..... 3.9 3.8 3.4
Communications and utilities..... 1.7 1.6 1.7
Building rents................... 2.6 2.4 2.0
Gain on sale of equipment........ (0.2) (0.2) (0.1)
----- ----- -----
Total operating expenses..... 92.6 93.9 91.8
----- ----- -----
Operating income.................... 7.4 6.1 8.2
Other income (expense)
Interest expense................. (0.1) (0.1) (0.1)
Other, net....................... 0.7 0.1 0.2
----- ----- -----
Earnings before income taxes........ 8.0 6.1 8.3
Income taxes........................ 3.1 2.4 3.2
----- ----- -----
Net earnings........................ 4.9% 3.7% 5.1%
===== ===== =====
62
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Operating revenues increased 4.6% in 2000 to $131.1 million from $125.3
million in 1999. The increase was primarily attributable to an improved yield
on freight hauled, the benefit from a fuel surcharge and a reduction in
lower-yield freight as a percentage of total tonnage as a result of Motor
Cargo's account rationalization program.
Average revenue per shipment increased 8.3% to $131.95 in 2000 compared to
$121.82 in 1999. Revenue per hundredweight increased to $11.55 in 2000 from
$11.02 for 1999. The number of shipments during 2000 decreased by 3.8% to
961,630, compared to 999,563 for 1999. Tonnage decreased by 0.6% to 549,285 in
2000, compared to 552,412 in 1999.
Motor Cargo's warehouse and distribution management company, MC Distribution
Services, contributed $4.7 million of the $131.1 million in operating revenues
for the year ended December 31, 2000, compared to $4.1 million for the year
ended December 31, 1999. The increase was due primarily to increased revenue
from existing accounts as well as the addition of some smaller new accounts.
As a percentage of operating revenues, salaries, wages, and benefits
increased to 49.7% for the year ended December 31, 2000 from 47.5% for 1999.
The increase was due primarily to the use of more Motor Cargo line drivers
instead of purchased transportation. The average number of full time line
drivers employed by Motor Cargo increased approximately 29% to 161 during 2000,
compared to 125 in 1999. At December 31, 2000, there were 187 full time line
drivers compared to 145 on December 31, 1999. Salaries and wage rates increased
approximately 4% in 2000 compared to 1999.
Operating supplies and expenses increased to 16.6% of operating revenue in
2000 compared to 16.2% in 1999. Contributing to this increase were the costs of
fuel, parts, tires and repairs associated with the increased use of Motor Cargo
owned vehicles instead of purchased transportation during 2000. In addition,
the price of fuel averaged approximately $0.36 more per gallon during 2000 over
1999. Higher fuel prices resulted in additional costs of approximately $2.3
million, or 1.75% of operating revenues in 2000 compared to 1999. Other costs
including agent commissions were reduced in 2000 compared to 1999. This was
partially the result of converting two agencies to Motor Cargo-owned facilities
during the second half of 1999 and the conversion of two additional agencies in
the second half of 2000.
Purchased transportation decreased to 9.0% of operating revenues in 2000
from 12.5% in 1999. Motor Cargo reduced the miles driven by purchased
transportation, while increasing the miles driven by Motor Cargo owned vehicles
and employee line drivers. As mentioned above, cost for wages, fuel, parts and
repairs related to the increased Motor Cargo driven miles partially offset the
reduction in purchased transportation.
Depreciation expense has been reduced to 6.7% of operating revenue in 2000
from 7.0% in 1999. While depreciation expense increased in buildings and
furnishings resulting from the completion of the new terminal facilities in
Phoenix and Reno, depreciation expense for revenue equipment was reduced by
improved utilization of tractors used both on the line during the night and in
pick-up and delivery service in the city during the day.
Insurance and claims decreased to 2.6 % of operating revenues in 2000 from
3.1% in 1999. Claims expense for damaged freight was reduced by slightly less
than 0.5% of revenue in 2000 compared to 1999. Also, fewer accidents occurred
and claim settlement amounts were smaller during 2000 compared to 1999.
Frequency of accidents per million miles decreased to 4.8 during 2000 from 6.4
in 1999.
Building rents increased to 2.6% of operating revenues in 2000 compared to
2.4% in 1999. This was due primarily to lease payments for additional
facilities in Fremont, California and Boise, Idaho, as well as continuing lease
payments on unused facilities in Chicago, Illinois, Benicia, California and
Boise, Idaho for the majority of the year. All leases on unused facilities
expired prior to the end of the year 2000.
Total operating expense decreased to 92.6% of operating revenues for 2000,
compared to 93.9% for 1999.
Net earnings increased 38% to 6.4 million for year 2000, compared to 4.7
million for 1999. Excluding unusual items, consisting primarily of a gain from
the sale of the Newark terminal facility, net earnings increased 26% to 5.9
million. Earnings per diluted share increased to $0.95 in 2000, compared to
$0.67 in 1999. Excluding unusual items, earnings per diluted share were $0.87
for 2000.
63
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Operating revenues increased 9.2% in 1999 to $125.3 million from $114.7
million in 1998. The increase was attributable to the increased volume of
freight. The number of shipments during 1999 increased by 11.8% to 999,563,
compared to 893,957 for 1998. Revenue per hundredweight increased to $11.02 in
1999 from $10.92 for 1998.
Motor Cargo's warehousing and distribution management company, MC
Distribution Services, contributed $4.1 million of the $125.3 million in
operating revenues for the year ended December 31, 1999 compared to $3.1
million for the year ended December 31, 1998. This increase was due primarily
to the expansion of a contract with one customer and the addition of several
smaller customers.
Tonnage increased by 7.7% to 552,412 in 1999, compared to 512,705 in 1998.
Average revenue per bill decreased 2.8% to $121.82 in 1999 compared to $125.31
in 1998. Fourth quarter average revenue per bill increased to $127.87, however,
as a result of adjustments to pricing on freight that was not producing
sufficient yield.
As a percentage of operating revenues, salaries, wages, and benefits
increased to 47.5% for the year ended December 31, 1999 from 45.1% for 1998.
Salaries and wage rates increased approximately 4% in 1999 compared to 1998.
The increase was due primarily to reduced yield in revenue as evidenced by the
reduction in average revenue per bill and increased staffing of full time
employees with their associated benefits. Additional line drivers were employed
allowing a reduction in the use of purchased transportation.
Operating supplies and expenses, which include agent commissions, tires,
parts, repairs and fuel and other general operating expenses, increased in 1999
to 16.2% of operating revenue, compared to 13.9% for 1998. The increase was
primarily attributable to increased expenses, such as fuel, parts, tires and
repairs, associated with the shift from using purchased transportation to using
more Motor Cargo trailers and drivers.
Purchased transportation decreased to 12.5% of operating revenues in 1999
from 15.7% for 1998. The decrease was caused by the shifting of costs from
purchased transportation to other expense categories, such as payroll,
operating supplies and expense, operating taxes and licenses, and depreciation,
associated with having approximately 30 more line drivers during 1999 compared
to 1998. Motor Cargo has increased its staff employee drivers in order to
provide more reliable and consistent service.
Interest expense was slightly less during 1999 compared to 1998. At December
31, 1999, total long-term obligations were $8.1 million compared to $5.5
million at December 31, 1998.
Building rents increased to 2.4% of operating revenue for 1999 as compared
to 2.0% for 1998. This increase was due primarily to lease payments for
additional facilities in Fremont, California and Boise, Idaho as well as
continuing lease payments on unused facilities in Chicago, Illinois, Benicia,
California, and Boise, Idaho.
Liquidity and Capital Resources
Motor Cargo's primary sources of liquidity are funds provided by operations
and bank borrowings. Net cash provided by operating activities was
approximately $14.5 million for the first nine months of 2001, compared to
$11.4 million for the corresponding period in 2000. Net cash provided by
operating activities is primarily attributable to Motor Cargo's earnings before
depreciation and amortization expense.
Capital expenditures totaled approximately $8.8 million during the first
nine months of 2001, compared to $7.2 million in the comparable period of 2000.
Net cash used in financing activities was $6.9 million for the nine months
ended September 30, 2001, compared to $5.2 million for the comparable period of
2000. At September 30, 2001, total borrowings under long-term obligations
totaled approximately $1.2 million, compared to $8.1 million as of September
30, 2000. Motor Cargo's long-term obligations as of September 30, 2001 consist
of mortgages on two terminal facilities.
64
Motor Cargo is a party to a loan agreement with Zions First National Bank
that provides for a revolving line of credit in an amount not exceeding $5
million. The loan agreement provides for the issuance of letters of credit and
may be used for this purpose, as well as to fund the working capital needs of
Motor Cargo. As of September 30, 2001, there was no outstanding balance under
this revolving line of credit.
Zions has also provided a second revolving line of credit to Motor Cargo in
an amount not to exceed $20 million. Motor Cargo intends to use amounts
available under this credit facility primarily to purchase equipment used in
operations and for other corporate purposes. At September 30, 2001 there was no
outstanding balance under this facility. The outstanding balance under this
facility fluctuates as Motor Cargo draws on the line of credit or repays
outstanding amounts. Amounts outstanding under this facility are generally
classified as long-term obligations provided that they are not due within 12
months. Motor Cargo and Zions have periodically amended the facility to extend
the maturity date, as necessary, in order to continue to permit amounts
outstanding under this facility to be classified as long-term obligations. If
Motor Cargo is unable to further extend the maturity date of this facility on
acceptable terms, Motor Cargo will seek to obtain similar financing from other
sources.
All amounts outstanding under the two loan facilities described above accrue
interest at a variable rate established from time to time by Zions. Motor Cargo
does have the option, however, to request that specific advances accrue
interest at a fixed rate quoted by Zions, subject to certain prepayment
restrictions. All amounts outstanding under the two loan facilities are
collateralized by Motor Cargo's inventory, chattel paper, accounts receivable
and equipment now owned or hereafter acquired by Motor Cargo.
Motor Cargo's management believes that its net cash provided by operating
activities and its existing lines of credit are sufficient to fund capital
expenditures and any other significant obligations for the foreseeable future.
In 1999, Motor Cargo announced a share repurchase program whereby the board
of directors of Motor Cargo authorized the repurchase of up to 700,000 shares.
As of December 31, 2000, a total of 511,500 shares had been repurchased by
Motor Cargo for approximately $2.9 million.
Inflation
Inflation has had a minimal effect upon Motor Cargo's profitability in
recent years. Most of Motor Cargo's operating expenses are inflation sensitive,
with inflation generally producing increased costs of operation. Although Motor
Cargo historically has been able to pass through most increases in fuel prices
and taxes to customers in the form of fuel surcharges or higher rates, Motor
Cargo generally must wait for larger carriers to implement fuel surcharges
before Motor Cargo can effectively implement fuel surcharges. Fuel prices
increased significantly during the third quarter of 1999. Accordingly, Motor
Cargo implemented a fuel surcharge in mid-August of 1999 to limit the impact of
fuel costs in future periods. The fuel surcharge remained in effect throughout
the year 2000. Although the fuel surcharge reduces the impact of rising fuel
costs, increased fuel prices can nevertheless have an adverse effect on the
operations and profitability of Motor Cargo due to the difficulty of imposing
and collecting the surcharge. Motor Cargo expects that inflation will affect
its costs no more than it affects those of other regional LTL carriers.
Seasonality
Motor Cargo experiences some seasonal fluctuations in freight volume.
Historically, Motor Cargo's shipments decrease during the winter months. In
addition, Motor Cargo's operating expenses historically have been higher in the
winter months due to decreased fuel efficiency and increased maintenance costs
for revenue equipment in colder weather.
Motor Cargo's Cautionary Statement for Forward-Looking Statements
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events, future revenues or performance, capital expenditures, financing
needs, plans or
65
intentions relating to acquisitions by Motor Cargo and other information that
is not historical information. When used in this report, the words "estimates,"
"expects," "anticipates," "forecasts," "plans," "intends," "believes" and
variations of such words or similar expressions are intended to identify
forward-looking statements. Additional forward-looking statements may be made
by Motor Cargo from time to time. All such subsequent forward-looking
statements, whether written or oral and whether made by or on behalf of Motor
Cargo, are also expressly qualified by these cautionary statements.
Motor Cargo's forward-looking statements are based upon Motor Cargo's
current expectations and various assumptions. Motor Cargo's expectations,
beliefs and projections are expressed in good faith and are believed by Motor
Cargo to have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in Motor Cargo's
records and other data available from third parties, but there can be no
assurance that management's expectations, beliefs and projections will result
or be achieved or accomplished. Motor Cargo's forward-looking statements apply
only as of the date made. Motor Cargo undertakes no obligation to publicly
update or revise forward-looking statements which may be made to reflect events
or circumstances after the date made or to reflect the occurrence of
unanticipated events.
There are a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in, contemplated by or
underlying the forward-looking statements contained in this prospectus. These
risks include, but are not limited to, economic factors and fuel price
fluctuations, the availability of employee drivers and independent contractors,
risks associated with geographic expansion, capital requirements, claims
exposure and insurance costs, competition and environmental hazards. Each of
these risks and certain other uncertainties are discussed in more detail in
Motor Cargo's Annual Report on Form 10-K for the year ended December 31, 2000.
There may also be other factors, including those discussed elsewhere in this
prospectus, that may cause Motor Cargo's actual results to differ from the
forward-looking statements. Any forward-looking statements made by or on behalf
of Motor Cargo should be considered in light of these factors.
Additional Information
A detailed description of Motor Cargo's business, financial statements and
other matters related to Motor Cargo is incorporated by reference in this
prospectus from materials filed by Motor Cargo with the SEC, including Motor
Cargo's Annual Report on Form 10-K for the year ended December 31, 2000,
Quarterly Reports on Forms 10-Q for the quarters ended September 30, 2001, June
30, 2001 and March 31, 2001 and Current Report on Form 8-K filed October 16,
2001. Shareholders desiring copies of such documents may obtain such copies as
described under the captions "Additional Information" on the page preceding the
table of contents and "Where You Can Find More Information" on page 82.
66
DESCRIPTION OF UNION PACIFIC CAPITAL STOCK
The following summary of the terms of Union Pacific capital stock prior to,
and after completion of, the offer and the merger is not meant to be complete
and is qualified by reference to the Union Pacific's revised articles of
incorporation and Union Pacific's bylaws. Copies of Union Pacific's revised
articles of incorporation and Union Pacific's bylaws are incorporated by
reference and will be sent upon request to shareholders of Motor Cargo common
stock. See "Additional Information" on the page preceding the table of contents
and "Where You Can Find More Information" on page 82.
General
Under Union Pacific's revised articles of incorporation, Union Pacific's
authorized capital stock consists of:
. 500,000,000 shares of Union Pacific common stock with $2.50 par value; and
. 20,000,000 shares of Union Pacific preferred stock with no par value.
On September 30, 2001, there were outstanding:
. 248,385,281 shares of Union Pacific common stock;
. 27,102,444 shares of Union Pacific common stock held by Union Pacific that
is authorized, but unissued; and
. no shares of Union Pacific preferred stock.
Transactions With Ten Percent Shareholders
Union Pacific's revised articles of incorporation provide that certain
transactions between Union Pacific and a beneficial owner of more than 10% of
Union Pacific's voting stock (which includes Union Pacific preferred stock)
must either:
. be approved by a majority of Union Pacific's voting stock other than that
held by such beneficial owner;
. satisfy minimum price and procedural criteria; or
. be approved by a majority of Union Pacific's directors who are not related
to such beneficial owner.
The transactions covered by these provisions include mergers,
consolidations, sales or dispositions of assets, adoption of a plan of
liquidation or dissolution, or other transactions involving a beneficial owner
of more than 10% of Union Pacific's voting stock.
Common Stock
This section describes the general terms of Union Pacific common stock.
Union Pacific common stock and the rights of Union Pacific common shareholders
are subject to the applicable provisions of the URBCA and the revised articles
of incorporation
Dividends. Subject to the rights of holders of any Union Pacific preferred
stock which may be issued, the holders of Union Pacific common stock are
entitled to receive dividends when, as and if declared by the board of
directors out of any legally available funds. Union Pacific may not pay
dividends on Union Pacific common stock, other than dividends payable in Union
Pacific common stock or any other class or classes of stock junior in rank to
Union Pacific preferred stock as to dividends or upon liquidation, unless all
dividends accrued on outstanding Union Pacific preferred stock have been paid
or declared and set apart for payment.
67
Voting Rights. Holders of Union Pacific common stock are entitled to one
vote for each share held. Any series of Union Pacific preferred stock will be
entitled, with certain exceptions, to vote together with the holders of Union
Pacific common stock as one class for the election of directors and upon all
matters voted upon by shareholders. In voting for the election of directors,
holders of Union Pacific common stock will not have the right to cumulate their
votes. Notwithstanding that shareholders will not be entitled to cumulate votes
in the election of directors, no one of the directors may be removed if the
votes of a sufficient number of shares are cast against removal which, at an
election of the board of directors of Union Pacific would have been sufficient
to elect the director if cumulative voting were applicable.
Liquidation Rights. Any Union Pacific preferred stock would be senior to
Union Pacific common stock as to distributions upon liquidation, dissolution or
winding up of Union Pacific. After distribution in full of the preferential
amounts to be distributed to holders of preferred stock, holders of Union
Pacific common stock will be entitled to receive all remaining assets of Union
Pacific available for distribution to shareholders in the event of voluntary or
involuntary liquidation.
Miscellaneous. The Union Pacific common stock is not redeemable, has no
preemptive or conversion rights and is not liable for further assessments or
calls. All shares of Union Pacific common stock offered hereby will, upon
issuance, be fully paid and non-assessable.
Transfer Agent and Registrar. Computershare Investor Services, LLC is the
transfer agent and registrar for Union Pacific common stock. Union Pacific
common stock is listed on the New York Stock Exchange and trades under the
symbol "UNP."
Preferred Stock
This section describes the general terms of the Union Pacific preferred
stock. The terms relating to any Union Pacific preferred stock to be offered
will be established in greater detail in the event any is issued and may
provide information that is different from this description. Summaries of some
of the provisions of our revised articles of incorporation follow. A
certificate of amendment to the revised articles of incorporation will specify
the terms of the Union Pacific preferred stock being offered and will be filed
before the Union Pacific preferred stock is issued.
Union Pacific's revised articles of incorporation authorize us to issue up
to 20,000,000 shares of Union Pacific preferred stock, without par value. No
shares of Union Pacific preferred stock are currently outstanding, and no
shares are reserved for issuance. Union Pacific's board of directors is
authorized to issue Union Pacific preferred stock in one or more series from
time to time, with such designations, preferences and relative participating,
optional or other special rights and qualifications, limitations and
restrictions thereof, as may be provided in resolutions adopted by Union
Pacific's board of directors. All shares of any one series of Union Pacific
preferred stock will be identical, except that shares of any one series issued
at different times may differ as to the dates from which dividends may be
cumulative. All series shall rank equally and shall provide for other specific
terms.
Union Pacific preferred stock of a particular series will have the dividend,
liquidation, redemption, conversion and voting rights described below unless
otherwise provided at the time of issuance of a series. The specific terms of
Union Pacific preferred stock that may be offered include:
. the distinctive serial designation and the number of shares constituting
the series;
. the dividend rate or rates, the payment date or dates for dividends and
the participating or other special rights, if any, with respect to
dividends;
. any redemption, sinking or retirement fund provisions applicable to the
Union Pacific preferred stock;
68
. the amount or amounts payable upon the shares of Union Pacific preferred
stock in the event of voluntary or involuntary liquidation, dissolution or
winding up of Union Pacific prior to any payment or distribution of the
assets of Union Pacific to the holders of any class or classes of stock
which are junior in rank to the Union Pacific preferred stock; and
. any terms for the conversion into or exchange for shares of common stock,
shares of Union Pacific preferred stock or debt securities.
The term "class or classes of stock which are junior in rank to the Union
Pacific preferred stock" means Union Pacific's common stock, and any other
class or classes of stock of Union Pacific hereafter authorized which rank
junior to the Union Pacific preferred stock as to dividends or upon liquidation.
Dividends. Holders of Union Pacific preferred stock will be entitled to
receive, when, as and if declared by Union Pacific's board of directors out of
funds of Union Pacific legally available therefor, cash dividends payable on
such dates in March, June, September and December of each year and at such
rates per share per annum as established at the time Union Pacific preferred
stock is issued. The applicable record dates regarding the payment of dividends
will be established at the time Union Pacific preferred stock is issued. The
holders of Union Pacific preferred stock will be entitled to such cash
dividends before any dividends on any class of stock junior in rank to Union
Pacific preferred stock shall be declared or paid or set apart for payment.
Whenever dividends shall not have been so paid or declared or set apart for
payment upon all shares of each series of Union Pacific preferred stock, such
dividends shall be cumulative and shall be paid, or declared and set apart for
payment, before any dividends can be declared or paid on any class or classes
of stock of Union Pacific junior in rank to the Union Pacific preferred stock.
Any such accumulations of dividends on Union Pacific preferred stock shall not
bear interest. The foregoing shall not apply to dividends payable in shares of
any class or classes of stock junior in rank to the Union Pacific preferred
stock.
Convertibility. No series of Union Pacific preferred stock will be
convertible into, or exchangeable for, shares of Union Pacific common stock,
shares of Union Pacific preferred stock or any other class or classes of stock
of Union Pacific or debt securities except as established at the time Union
Pacific preferred stock is issued.
Redemption and Sinking Fund. No series of Union Pacific preferred stock
will be redeemable or receive the benefit of a sinking, retirement or other
analogous fund except as established at the time Union Pacific preferred stock
is issued.
Liquidation Rights. Upon any voluntary or involuntary liquidation,
dissolution or winding up of Union Pacific, holders of any series of Union
Pacific preferred stock will be entitled to receive payment of or to have set
aside for payment the liquidation amount per share, if any, specified at the
time Union Pacific preferred stock is issued, in each case together with any
applicable accrued and unpaid dividends, before any distribution to holders of
common stock or any class of stock junior in rank to the Union Pacific
preferred stock. A voluntary sale, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of Union Pacific's property or assets to, or a consolidation or merger of Union
Pacific with, one or more corporations shall not be deemed to be a liquidation,
dissolution or winding up of Union Pacific for purposes of this paragraph.
Voting Rights. Except as provided below, holders of Union Pacific preferred
stock shall be entitled to one vote for each share held and shall vote together
with the holders of common stock as one class for the election of directors and
upon all other matters which may be voted upon by shareholders of Union
Pacific. Holders of Union Pacific preferred stock shall not possess cumulative
voting rights in the election of directors. See "--Common Stock--Voting Rights"
for a discussion of voting rights in the election of directors.
69
If dividends on Union Pacific preferred stock shall be in arrears in an
aggregate amount at least equal to six quarterly dividends, then the holders of
all series of Union Pacific preferred stock, voting separately as one class,
shall be less entitled, at the next annual meeting of the shareholders of Union
Pacific or at a special meeting held in place thereof, or at a special meeting
of the holders of the Union Pacific preferred stock called as provided below,
to elect two directors of Union Pacific. While the holders of Union Pacific
preferred stock are so entitled to elect two directors of Union Pacific, they
shall not be entitled to participate with the Union Pacific common stock in the
election of any other such directors. Whenever all arrearages in dividends on
the Union Pacific preferred stock shall have been paid and dividends thereon
for the current quarterly period shall have been paid or declared and a sum
sufficient for the payment thereof set aside, then the right of the holders of
the Union Pacific preferred stock to elect two directors shall cease, provided
that such voting rights shall again vest in the case of any similar future
arrearages in dividends.
At any time after the right to vote for two directors shall have so vested
in Union Pacific preferred stock, the secretary of Union Pacific may, and upon
the written request of the holders of record of 10% or more of the shares of
Union Pacific preferred stock then outstanding, shall, call a special meeting
of the holders of Union Pacific preferred stock for the election of the
directors to be elected by them, to be held within 30 days after such call and
at the place and upon the notice provided by law and in Union Pacific's bylaws
for the holding of meetings of shareholders. The secretary shall not be
required to call such meeting in the case of any such request received less
than 90 days before the date fixed for any annual meeting of shareholders of
Union Pacific. If any such special meeting shall not be called by the secretary
within 30 days after receipt of any such request, then the holders of record of
10% or more of the shares of Union Pacific preferred stock then outstanding may
designate in writing one of their number to call such meeting, and the person
so designated may call such meeting to be held at the place and upon the notice
provided above, and for that purpose shall have access to the stock ledger of
Union Pacific. No such special meeting and no adjournment thereof shall be held
on a date later than 30 days before the annual meeting of the shareholders of
Union Pacific or a special meeting held in place thereof next succeeding the
time when the holders of the Union Pacific preferred stock become entitled to
elect directors as provided above.
If any meeting of Union Pacific's shareholders shall be held while holders
of Union Pacific preferred stock are entitled to elect two directors as
provided above, and if the holders of at least a majority of the shares of
Union Pacific preferred stock then outstanding shall be present or represented
by proxy at such meeting or any adjournment thereof, then, by vote of the
holders of at least a majority of the shares of Union Pacific preferred stock
present or so represented at such meeting, the then authorized number of
directors of Union Pacific shall be increased by two and at such meeting the
holders of the Union Pacific preferred stock shall be entitled to elect the
additional directors so provided for, but such additional director so elected
shall hold office beyond the annual meeting of the shareholders or a special
meeting held in place thereof next succeeding the time when the holders of the
Union Pacific preferred stock become entitled to elect two directors as
provided above. Whenever the holders of the Union Pacific preferred stock shall
be divested of special voting power as provided above, the terms of office of
all persons elected as directors by the holders of the Union Pacific preferred
stock as a class shall forthwith terminate, and the authorized number of
directors of Union Pacific shall be reduced accordingly.
The affirmative vote or consent of 66 2/3% of all shares of Union Pacific
preferred stock outstanding shall be required before Union Pacific may:
. create any other class or classes of stock prior in rank to the Union
Pacific preferred stock, either as to dividends or upon liquidation, or
increase the number of authorized shares of such class of stock; or
. amend, alter or repeal any provisions of Union Pacific's revised articles
of resolution adopted by Union Pacific's board of directors providing for
the issuance of any series of Union Pacific preferred stock so as to
adversely affect the preferences, rights or powers of the Union Pacific
preferred stock.
The affirmative vote or consent of at least a majority of the shares of
Union Pacific preferred stock at the time outstanding shall be required for
Union Pacific to:
. increase the authorized number of shares of Union Pacific preferred stock;
70
. create or increase the authorized number of shares of any other class of
stock ranking on a parity with the Union Pacific preferred stock either as
to dividends or upon liquidation; or
. sell, lease or convey all or substantially all of the property or business
of Union Pacific, or voluntarily liquidate, dissolve or wind up Union
Pacific, or merge or consolidate Union Pacific with any other corporation
unless the resulting or surviving corporation will have after such merger
or consolidation no stock either authorized or outstanding (except such
stock of the corporation as may have been authorized or outstanding
immediately preceding such merger or consolidation, or such stock of the
resulting or surviving corporation as may be issued in exchange therefor)
prior in rank either as to dividends or upon liquidation to the Union
Pacific preferred stock or the stock of the resulting or surviving
corporation issued in exchange therefor.
No consent of the holders of Union Pacific preferred stock shall be required
in connection with any mortgaging or other hypothecation by Union Pacific of
all or any part of its property or business.
Miscellaneous. The Union Pacific preferred stock has no preemptive rights,
is not liable for further assessments or calls. Shares of Union Pacific
preferred stock which have been issued and reacquired in any manner by Union
Pacific shall resume the status of authorized and unissued shares of Union
Pacific preferred stock and shall be available for subsequent issuance. There
are no restrictions on repurchase or redemption of the Union Pacific preferred
stock while there is any arrearage in dividends or sinking fund installments
except as may be established at the time Union Pacific preferred stock is
issued.
Transfer Agent and Registrar. The transfer agent and registrar for each
series of Union Pacific preferred stock will be established at the time Union
Pacific preferred stock is issued.
71
COMPARISON OF SHAREHOLDER RIGHTS
Union Pacific and Motor Cargo are incorporated under the laws of the State
of Utah. When the offer is completed, those Motor Cargo shareholders who have
elected to exchange their shares in the offer for shares of Union Pacific
common stock, whose rights are currently governed by the URBCA, the articles of
incorporation of Motor Cargo and the bylaws of Motor Cargo, will, upon
completion of the offer, become shareholders of Union Pacific, and their rights
as such will be governed by the URBCA, the Union Pacific revised articles of
incorporation and the bylaws of Union Pacific. The material differences between
the rights of holders of Motor Cargo common stock and the rights of holders of
Union Pacific common stock, resulting from the differences in their governing
documents, are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of Union Pacific common stock under applicable Utah law, the
Union Pacific revised articles of incorporation and the Union Pacific bylaws or
the rights of the holders of Motor Cargo common stock under applicable Utah
law, the Motor Cargo articles of incorporation and the Motor Cargo bylaws, or a
complete description of the specific provisions referred to herein. This
summary contains a list of the material differences but is not meant to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to the URBCA and the
governing corporate instruments of Union Pacific and Motor Cargo, to which the
holders of Motor Cargo common stock are referred. Copies of such governing
corporate instruments of Union Pacific and Motor Cargo are available, without
charge, to any person, including any beneficial owner to whom this prospectus
is delivered, by following the instructions listed under "Where You Can Find
More Information."
Summary of Material Differences Between the Rights of Motor Cargo Shareholders
and the Rights of Union Pacific Shareholders
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Authorized Capital The Motor Cargo articles of The Union Pacific revised articles of
Stock incorporation authorize the issuance incorporation authorize the issuance of
of up to 100,000,000 shares of Motor up to 500,000,000 shares of Union
Cargo common stock, no par value, Pacific common stock, par value $2.50
and 25,000,000 shares of Motor per share, and 20,000,000 shares of
Cargo preferred stock, no par value. Union Pacific preferred stock, no par
value.
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Voting Rights All voting rights of Motor Cargo, The holders of common stock of Union
subject to any preferences or rights Pacific shall have one vote in respect of
that may be granted to the holders of each share of stock held of record on the
preferred stock, shall be exercised by books of Union Pacific and shall vote
the holders of the common stock. together, share for share, with the
Each outstanding share entitled to holders of the preferred stock as one
vote shall be entitled to one vote and class for the election of directors and
each fractional share shall be entitled upon all other matters voted upon by the
to a corresponding fractional vote shareholders. Directors are elected by a
upon each matter submitted to a vote plurality of the votes cast by the shares
at a meeting of shareholders. entitled to vote in the election at a
Directors are elected by a plurality of meeting at which a quorum is present.
the votes cast by the shares entitled to There is no cumulative voting.
vote in the election at a meeting at
which a quorum is present. There is
no cumulative voting.
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Classification of the The board is not divided into classes. The board is not divided into classes.
Board of Directors
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72
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Number of Directors The number of Motor Cargo directors The number of directors of the Union
may not be less than three nor more Pacific board is fixed by the bylaws, but
than fifteen. The board currently may not be less than three. The board
consists of six directors. The number currently consists of thirteen directors.
of directors may be changed by the
shareholders or the board of directors
within the specified range.
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Removal of Directors Motor Cargo directors may be Union Pacific directors may be removed
removed without cause by a majority without cause by a vote of the holders of
of votes of the shareholders at a 2/3 of the shares then entitled to vote at
meeting called expressly for that an election of directors or at a meeting
purpose. If a director is elected by a called expressly for that purpose.
voting group of shareholders, only the Notwithstanding that shareholders will
shareholders of that voting group may not be entitled to accumulate votes in the
participate in the vote to remove the election of directors, no one of the
director. directors may be removed if the votes of
a sufficient number of shares are cast
against such director's removal which, at
an election of the class of directors of
which such director is a member, would
be sufficient to elect such director.
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Filling of Board If a vacancy occurs on the Motor If a vacancy occurs on the Union Pacific
Vacancies Cargo board of directors, including a board of directors, including a vacancy
vacancy resulting from an increase in resulting from an increase in the number
the number of directors, such vacancy of directors, such vacancy may be filled
may be filled by shareholders, the by a vote of the board and, if the
board, or, if the directors remaining directors remaining in office consist of
in office constitute fewer than a fewer than a quorum of the board, a
quorum of the board, by the majority of the directors then in office,
affirmative vote of a majority of all though less than a quorum, may fill the
the directors remaining in office. vacancy.
For a vacancy that was held by a
director elected by a voting group of
shareholders: (i) if one or more of the
other directors serving were elected
by the same voting group, only they
are entitled to vote to fill the vacancy
if the vacancy is filled by the
directors and (ii) only the holders of
shares of that voting group are
entitled to vote to fill the vacancy if it
is filled by the shareholders.
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73
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
---------------------------------------------------------------------------------------------------------------
Limitation of Director Pursuant to the articles of Pursuant to the revised articles of
or Officer Liability incorporation of Motor Cargo, no incorporation of Union Pacific, and to
director or officer shall be personally the extent that the URBCA permits the
liable to Motor Cargo or its limitation or elimination of the liability
shareholders for monetary damages of directors, no director of Union Pacific
for any action taken or any failure to shall be liable to Union Pacific or its
take any action as a director or shareholders for monetary damages for
officer. This limitation shall not breach of fiduciary duty as a director.
extend to (a) the amount of a No amendment to or repeal of the
financial benefit received by the applicable provision in the revised
director or officer to which he or she articles of incorporation of Union
is not entitled, (b) an intentional Pacific shall apply to or have any effect
infliction of harm on Motor Cargo or on the liability or alleged liability of any
its shareholders, (c) a violation of director of Union Pacific for or with
Section 842 of the URBCA, or (d) an respect to any acts or omissions of such
intentional violation of criminal law. director occurring prior to such
amendment or repeal.
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Indemnification of Motor Cargo may indemnify any Union Pacific shall indemnify to the full
Directors, Officers or person made a party to a proceeding extent permitted by law any person
Employees because the person is or was a made or threatened to be made a party to
director, officer, fiduciary, agent or any action, suit or proceeding, whether
employee of Motor Cargo against criminal, civil, administrative or
liability incurred in the proceeding, investigative, by reason of the fact that
consistent with the provisions of such person is or was a director, officer
applicable law, provided, however, or employee of Union Pacific or serves
that Motor Cargo shall only or served at the request of Union Pacific
indemnify a person if certain any other enterprise as a director,
procedures are complied with and officer, fiduciary or employee. Such
certain standards are met, under the indemnification shall include the right to
URBCA. Such indemnification shall receive payment in advance of any final
include the right to receive payment disposition of any expenses incurred by
in advance of any final disposition of any such person in connection with any
any reasonable expenses incurred by such action, suit or proceeding,
any such person in connection with consistent with the provisions of the
any such proceeding, consistent with URBCA.
the provisions of the URBCA.
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Shareholder Action by Any action may be taken without a Any action may be taken without a
Written Consent meeting and without prior notice if meeting and without prior notice if one
one or more consents in writing, or more consents in writing, setting forth
setting forth the action so taken, are the action so taken, are signed by the
signed by the holders of outstanding holders of outstanding shares having not
shares having not less than the less than the minimum number of votes
minimum number of votes necessary necessary to authorize or take the action
to authorize or take the action at a at a meeting at which all shares entitled
meeting at which all shares entitled to to vote thereon were present and voted.
vote thereon were present and voted.
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74
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
-----------------------------------------------------------------------------------------------------------
Dividends The board may authorize, and Motor Subject to the preferential rights of the
Cargo may make, distributions preferred stock, the holders of the
(including dividends on its common stock shall be entitled to
outstanding shares) in the manner and receive, to the extent permitted by law,
upon the terms and conditions such dividends as may be declared from
provided by law. Motor Cargo has time to time by the Union Pacific board.
never distributed dividends.
Union Pacific currently pays quarterly
dividends of $0.20 per share on its
common stock.
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Advance Notice Bylaw Motor Cargo has not adopted advance Only persons who are nominated in
Provisions Relating to notice bylaw provisions. accordance with the following
Nominations of procedures shall be eligible for election
Directors as Union Pacific directors. Nominations
of persons for election to the board may
be made at any annual meeting of
shareholders, or at any special meeting
of shareholders called for the purpose of
electing directors, (a) by or at the
direction of the board or the executive
committee or (b) by any Union Pacific
shareholder (i) who is a shareholder of
record on the date of the giving of notice
and on the record date for the
determination of shareholders entitled to
vote at such meeting and (ii) who
complies with the notice procedures.
In addition to any other applicable
requirements for a nomination to be
made by a shareholder, such shareholder
must have given timely notice thereof in
proper written form to the secretary of
Union Pacific.
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Annual Meeting An annual meeting of Motor Cargo An annual meeting of Union Pacific
shareholders shall be held each year shareholders shall be held at such time
on the date, at the time, and at the as shall be ordered by the board or
place, fixed by the board of Motor executive committee, but, unless
Cargo. otherwise ordered, shall be held at 8:30
a.m. on the third Friday of April in each
year.
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75
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Special Meeting Special meetings of the Motor Cargo Special meetings of Union Pacific
shareholders may be called, for any shareholders may be called by the board,
purpose described in the notice of the the executive committee, and shall be
meeting, by the president, or by the called by the president at the request of
board of Motor Cargo, and shall be the holder(s) of common stock
called by the president at the request representing not less than 10% of all
of the holder(s) of common stock outstanding votes of Union Pacific
representing not less than 10% of all entitled to be cast on any issue at the
outstanding votes of Motor Cargo meeting. A request by a shareholder for
entitled to be cast on any issue at the a special meeting must be accompanied
meeting. by a statement of purposes, prepared in
accordance with Union Pacific's bylaws.
The matters of a special meeting shall be
stated in the order therefor, and the
business transacted shall be confined to
such matters.
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Shareholder Quorum The majority of the votes entitled to The majority of the votes entitled to be
and Voting be cast on the matter by the voting cast on the matter by the voting group
Requirements group constitutes a quorum of that constitutes a quorum of that voting
voting group for action on that group for action on that matter.
matter.
If a quorum exists, action on a matter
If a quorum exists, action on a matter (other than the election of directors) by a
(other than the election of directors) voting group is approved if the votes
by a voting group is approved if the cast within the voting group favoring the
votes cast within the voting group action exceed the votes cast opposing
favoring the action exceed the votes the action, unless the URBCA requires a
cast opposing the action, unless the greater number.
URBCA requires a greater number.
If the URBCA provides for voting by a
If the URBCA provides for voting by single voting group on a matter, action
a single voting group on a matter, on that matter is taken when approved
action on that matter is taken when by that voting group.
approved by that voting group.
Shares entitled to vote as a separate
Shares entitled to vote as a separate voting group may take action on a matter
voting group may take action on a at a meeting only if a quorum of those
matter at a meeting only if a quorum shares exists with respect to that matter
of those shares exists with respect to
that matter.
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Preferred Stock The Motor Cargo board of directors, The Union Pacific board of directors is
without shareholder action, may authorized to provide for the issuance of
amend the articles of incorporation to shares of preferred stock in one or more
establish additional terms of the series with such designations,
preferred stock pursuant to and in preferences and relative participating,
accordance with Section 602 of the optional or other special rights and
URBCA. qualifications, limitations or restrictions
thereof.
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Share Repurchases Motor Cargo may acquire its own Union Pacific may acquire its own
shares and the shares so acquired shares and the shares so acquired
constitute authorized but unissued constitute authorized but unissued
shares. shares.
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76
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Business Combinations Motor Cargo has not adopted a In addition to any affirmative vote
with Interested business combination provision. required by law or Union Pacific's
Shareholders revised articles of incorporation or
bylaws, a business combination shall
require the affirmative vote of not less
than a majority of the votes entitled to be
cast by the holders of all the then
outstanding shares of voting stock,
voting together as a single class,
excluding voting stock beneficially
owned by any "interested shareholder."
An "interested shareholder" is any entity
that beneficially owns, or beneficially
owned within 2 years, 10% or more of
the voting power of Union Pacific's
capital stock.
The above shall not be applicable to any
particular business combination, and
such business combination shall require
only such affirmative vote, if any, as is
required by law or by any other
provision of Union Pacific's revised
articles of incorporation or bylaws, or
any agreement with any national
securities exchange, if all of the
conditions specified in either of the
following paragraphs (1) or (2) are met
or, in the case of a business combination
not involving the payment of
consideration to all holders of Union
Pacific's outstanding capital stock, if the
condition specified in the following
paragraph (1) is met.
(1) The business combination shall
have been approved by a majority
(whether such approval is made
prior to or subsequent to the
acquisition of beneficial ownership
of the voting stock that caused the
interested shareholder to become an
interested shareholder) of the
continuing directors; and
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77
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Business Combinations (2) all of the following conditions shall
with Interested have been met:
Shareholders
. the aggregate amount of cash and
the fair market value of any other
consideration to be received by
holders of common stock in such
business combination shall be at
least equal to the highest amount
determined under clauses (i) and
(ii) below:
(i)(if applicable) the highest
per share price paid by the
interested shareholder for
any share of common stock
in connection with the
acquisition by the interested
shareholder of shares of
common stock (x) within the
two-year period immediately
prior to the announcement of
the proposed business
combination or (y) in the
transaction in which it
became an interested
shareholder, whichever is
higher; and
(ii)the fair market value per
share of common stock on
the announcement date or on
the date on which the
interested shareholder
became an interested
shareholder, whichever is
higher;
. the aggregate amount of cash and
the fair market value of any other
consideration to be received by
holders of shares of any
outstanding capital stock other
than common stock shall be at
least equal to the highest amount
determined under clause similar
to (i) and (ii) above and the
following clause: (if applicable)
the highest preferential amount
per share to which the holders of
shares of such capital stock
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78
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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Business Combinations would be entitled in the event of
with Interested any voluntary or involuntary
Shareholders liquidation, dissolution or
winding up of the affairs of
Union Pacific regardless of
whether the business
combination to be consummated
constitutes such an event;
. the consideration to be received
by holders of a particular class or
series of outstanding capital
stock shall be in cash or in the
same form as previously has
been paid by or on behalf of the
interested shareholder in
connection with its acquisition of
shares of such class or series of
capital stock;
. after the determination date and
prior to the consummation of
such business combination:
(i)except as approved by a
majority of the continuing
directors, there shall have
been no failure to declare
and pay at the regular date
any full quarterly dividends
payable in accordance with
the terms of any outstanding
capital stock;
(ii)there shall have been no
reduction in the annual rate
of dividends paid on the
common stock, except as
approved by a majority of
the continuing directors;
(iii)there shall have been an
increase in the annual rate of
dividends paid on the
common stock as necessary
to reflect any change that has
the effect of reducing the
number of outstanding
shares of common stock,
unless the failure to increase
such annual rate is approved
by a majority of the
continuing directors; and
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79
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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(iv)such interested shareholder
shall not have become the
beneficial owner of any
additional shares of capital
stock except as part of the
transaction that results in
such interested shareholder
becoming an interested
shareholder and except in a
transaction that, after giving
effect thereto, would not
result in any increase in the
interested shareholder's
percentage of beneficial
ownership of any capital
stock;
. after the determination date, such
interested shareholder shall not
have received the benefit of any
loans, advances, guarantees,
pledges or other financial
assistance or any tax credits or
other tax advantages provided by
Union Pacific;
. a proxy statement describing the
proposed business combination
and complying with the
requirements of the Exchange
Act and the rules and regulations
thereunder shall be mailed to all
shareholders of Union Pacific at
least 30 days prior to the
consummation of such business
combination, containing certain
required information; and
. such interested shareholder shall
not have made any major change
in Union Pacific's business or
equity capital structure without
the approval of a majority of the
continuing directors.
----------------------------------------------------------------------------------------------------------
Amendment of Charter Under the URBCA, the Motor Cargo Under the URBCA, the Union Pacific
board may adopt certain amendments board may adopt certain amendments
without shareholder approval and without shareholder approval and other
other amendments must be submitted amendments must be submitted to
to shareholders for approval, through shareholders for approval, through a
a recommendation of the board. recommendation of the board.
----------------------------------------------------------------------------------------------------------
80
-------------------------------------------------------------------------------------------------------
Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
-------------------------------------------------------------------------------------------------------
Amendment to Bylaws Motor Cargo's board may amend the Union Pacific's bylaws may be altered,
bylaws, except to the extent the amended or repealed at a meeting of the
bylaws and URBCA reserve such shareholders by a majority vote of those
power exclusively to the shareholders present in person or by proxy or at any
in whole or in part. The board may meeting of the board of by a majority
not adopt, amend, or repeal a bylaw vote of the directors then in office. The
that fixes a shareholder quorum or board may not adopt, amend, or repeal a
voting requirement that is greater bylaw that fixes a shareholder quorum or
than required by the URBCA. voting requirement that is greater than
required by the URBCA.
Motor Cargo's shareholders may
amend or repeal the bylaws of Motor
Cargo even though the bylaws may
also be amended or repealed by the
board of directors.
-------------------------------------------------------------------------------------------------------
81
LEGAL MATTERS
The validity of the Union Pacific common stock offered hereby will be passed
upon for Union Pacific by James J. Theisen, Esq., Senior Corporate Counsel of
Union Pacific. Mr. Theisen beneficially owns or has rights to acquire an
aggregate of less than 0.1% of Union Pacific's common stock. Certain tax
consequences of the offer and the merger are being passed on by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements and the related consolidated financial
statement schedule of Union Pacific Corporation and its subsidiaries as of
December 31, 2000 and 1999 and for each of the years in the three-year period
ended December 31, 2000, incorporated in this prospectus by reference from
Union Pacific Corporation's Annual Report on Form 10-K for the year ended
December 31, 2000, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Motor Cargo Industries, Inc. and
its subsidiaries as of December 31, 2000 and 1999 and for each of the years in
the three-year period ended December 31, 2000, included in this prospectus have
been audited by Grant Thornton LLP, independent auditors, as stated in their
report, and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Union Pacific and Motor Cargo file annual, quarterly and special reports,
proxy statements and other information with the SEC under the Exchange Act. You
may read and copy this information at the following locations of the SEC:
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet web site that contains reports, proxy
statements and other information about issuers, like Union Pacific and Motor
Cargo, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Union Pacific at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
We filed a registration statement on Form S-4 to register with the SEC the
sale of the shares of Union Pacific common stock to be issued pursuant to the
offer. This prospectus is a part of that registration statement. As allowed by
SEC rules, this prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement. In
addition, we also filed with the SEC a statement on Schedule TO pursuant to
Rule 14d-3 under the Exchange Act to furnish certain information about the
offer. You may obtain copies of the Form S-4 and the Schedule TO (and any
amendments to those documents) in the manner described above.
82
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this
prospectus. This prospectus incorporates by reference the documents set forth
below that Union Pacific and Motor Cargo have previously filed with the SEC.
These documents contain important information about Union Pacific and Motor
Cargo and their financial condition.
The following documents listed below that Union Pacific and Motor Cargo have
previously filed with the SEC are incorporated by reference:
Union Pacific SEC Filings Period
------------------------- ------
Quarterly Report on Form 10-Q..... Quarter ended September 30, 2001
Current Report on Form 8-K........ Dated October 18, 2001
Current Report on Form 8-K........ Dated October 16, 2001
Current Report on Form 8-K........ Dated July 19, 2001
Quarterly Report on Form 10-Q..... Quarter ended June 30, 2001
Current Report on Form 8-K........ Dated April 26, 2001
Quarterly Report on Form 10-Q..... Quarter ended March 31, 2001
Current Report on Form 8-K........ Dated March 8, 2001
Proxy Statement................... Filed on March 8, 2001
Current Report on Form 8-K........ Dated January 18, 2001
Annual Report on Form 10-K........ Year ended December 31, 2000
Motor Cargo SEC Filings Period
----------------------- ------
Current Report on Form 8-K........ Dated October 16, 2001
Quarterly Report on Form 10-Q..... Quarter ended September 30, 2001
Quarterly Report on Form 10-Q..... Quarter ended June 30, 2001
Quarterly Report on Form 10-Q..... Quarter ended March 31, 2001
Proxy Statement................... Filed on April 26, 2001
Annual Report on Form 10-K........ Year ended December 31, 2000
All documents filed by Union Pacific pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this prospectus to the date that
shares are accepted for exchange pursuant to our offer (or the date that our
offer is terminated) shall also be deemed to be incorporated herein by
reference.
Documents incorporated by reference are available from us without charge
upon request to our information agent, Morrow & Co., Inc., 445 Park Avenue, 5th
Floor, New York, New York 10022, collect at (212) 754-8000 or toll-free at
(800) 654-2468 if you represent a bank or a brokerage firm or (800) 607-0888 if
you are a shareholder. In order to ensure timely delivery, any request should
have been submitted no later than November 22, 2001. If you request any
incorporated documents from us, we will mail them to you by first class mail,
or another equally prompt means, within one business day after we receive your
request.
We have not authorized anyone to give any information or make any
representation about our offer that is different from, or in addition to, that
contained in this prospectus or in any of the materials that we have
incorporated by reference into this prospectus. Therefore, if anyone does give
you information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document are unlawful, or
if you are a person to whom it is unlawful to direct these types of activities,
then the offer presented in this document does not extend to you. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
83
INDEX TO MOTOR CARGO FINANCIAL STATEMENTS
Page
----
DECEMBER 31, 2000, 1999 AND 1998
Report of Independent Certified Public Accountants.......................................... F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999................................ F-3
Consolidated Statements of Earnings for the Years Ended December 31, 2000, 1999 and 1998.... F-4
Consolidated Statement of Shareholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998.......................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998.. F-6
Notes to Consolidated Financial Statements.................................................. F-7
SEPTEMBER 30, 2001 AND 2000
Consolidated Balance Sheets as of September 30, 2001 (Unaudited) and December 31, 2000
(Audited)................................................................................. F-18
Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2001
and 2000.................................................................................. F-19
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000. F-20
Notes to Interim Consolidated Financial Statements.......................................... F-21
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Motor Cargo Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Motor Cargo
Industries, Inc. and Subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of earnings, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Motor Cargo Industries, Inc. and Subsidiaries as of December 31, 2000 and
1999, and the consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended December 31, 2000,
in conformity with accounting principles generally accepted in the United
States of America.
/S/ GRANT THORNTON LLP
Salt Lake City, Utah
January 25, 2001
F-2
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------
2000 1999
------------ -----------
ASSETS
Current assets
Cash and cash equivalents (Note E)..................................... $ 7,033,681 $ 5,508,809
Receivables (Notes B, E and L)......................................... 18,124,930 16,570,062
Prepaid expenses....................................................... 2,112,198 2,720,084
Supplies inventory (Note E)............................................ 637,289 568,430
Deferred income taxes (Note G)......................................... 1,734,000 1,723,000
------------ -----------
Total current assets............................................... 29,642,098 27,090,385
Property and equipment, at cost (Notes C, F and L)........................ 106,185,662 99,459,949
Less accumulated depreciation and amortization......................... 51,851,119 46,644,471
------------ -----------
54,334,543 52,815,478
Other assets
Advances for purchase of real property (Note L)........................ 787,695 --
Other, net............................................................. 600,552 664,321
------------ -----------
1,388,247 664,321
------------ -----------
$ 85,364,888 $80,570,184
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations (Note F)................... $ 119,152 $ 109,151
Accounts payable....................................................... 2,854,290 3,361,660
Accrued liabilities (Note N)........................................... 7,477,843 6,323,095
Accrued claims (Note O)................................................ 1,440,438 1,727,391
Income taxes payable................................................... 435,366 119,931
------------ -----------
Total current liabilities.............................................. 12,327,089 11,641,228
Long-term obligations, less current maturities (Notes E and F)............ 8,015,125 8,020,523
Deferred income taxes (Note G)............................................ 7,522,000 7,267,000
Commitments and contingencies (Notes D, E, F, H, I, K, and L)............. -- --
Shareholders' equity (Notes F, I and M) Preferred stock, no par value;
Authorized--25,000,000 shares--none issued.............................. -- --
Common stock, no par value; Authorized--100,000,000 shares--issued and
outstanding 6,474,140 shares in 2000 and 6,925,040 shares in 1999.... 9,288,785 11,849,600
Retained earnings...................................................... 48,211,889 41,791,833
------------ -----------
57,500,674 53,641,433
------------ -----------
$ 85,364,888 $80,570,184
============ ===========
F-3
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
Operating revenues.......................... $131,111,694 $125,309,633 $114,724,798
Operating expenses
Salaries, wages and benefits............. 65,165,617 59,502,114 51,746,567
Operating supplies and expenses.......... 21,811,961 20,341,773 15,973,557
Purchased transportation................. 11,870,030 15,580,049 17,975,515
Operating taxes and licenses............. 5,047,912 4,730,417 3,884,923
Insurance and claims..................... 3,381,287 3,826,130 3,651,217
Depreciation and amortization............ 8,772,064 8,822,260 7,927,663
Communications and utilities............. 2,175,548 2,022,974 1,923,707
Building and equipment rents............. 3,423,529 3,043,136 2,365,006
Gain on sale of equipment................ (206,060) (241,084) (103,110)
------------ ------------ ------------
Total operating expenses............. 121,441,888 117,627,769 105,345,045
------------ ------------ ------------
Operating income..................... 9,669,806 7,681,864 9,379,753
Other income (expense)
Interest expense......................... (157,880) (138,810) (153,673)
Other, net (Note L)...................... 988,130 110,029 222,781
------------ ------------ ------------
830,250 (28,781) 69,108
------------ ------------ ------------
Earnings before income taxes......... 10,500,056 7,653,083 9,448,861
Income taxes (Note G)....................... 4,080,000 3,000,000 3,660,000
------------ ------------ ------------
Net earnings......................... $ 6,420,056 $ 4,653,083 $ 5,788,861
============ ============ ============
Earnings per common share--basic............ $ 0.95 $ 0.67 $ 0.83
============ ============ ============
Weighted-average shares outstanding--basic.. 6,734,734 6,938,365 6,987,820
============ ============ ============
Earnings per common share--diluted.......... $ 0.95 $ 0.67 $ 0.83
============ ============ ============
Weighted-average shares outstanding--diluted 6,738,766 6,940,656 6,991,820
============ ============ ============
The accompanying notes are an integral part of these statements.
F-4
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Preferred Stock Common Stock
---------------- ----------------------
Number Number Retained
of shares Amount of shares Amount earnings Total
--------- ------ --------- ----------- ----------- -----------
Balance, January 1, 1998...................... -- $-- 6,990,000 $12,101,298 $31,349,889 $43,451,187
Vesting of 5,000 shares pursuant to Restricted
Stock Agreement (Note M).................... -- -- -- 60,625 -- 60,625
Cashless repurchase of shares for income tax
withholding (Note M)........................ -- -- (2,180) (26,433) -- (26,433)
Net earnings for the year..................... -- -- -- -- 5,788,861 5,788,861
-- --- --------- ----------- ----------- -----------
Balance, December 31, 1998.................... -- -- 6,987,820 12,135,490 37,138,750 49,274,240
Vesting of 5,000 shares pursuant to Restricted
Stock Agreement (Note M).................... -- -- -- 40,000 -- 40,000
Cashless repurchase of shares for income tax
withholding (Note M)........................ -- -- (2,180) (17,440) -- (17,440)
Repurchase of shares (Note M)................. -- -- (60,600) (308,450) -- (308,450)
Net earnings for the year..................... -- -- -- -- 4,653,083 4,653,083
-- --- --------- ----------- ----------- -----------
Balance, December 31, 1999.................... -- -- 6,925,040 11,849,600 41,791,833 53,641,433
Vesting of 5,000 shares pursuant to Restricted
Stock Agreement (Note M).................... -- -- -- 23,750 -- 23,750
Repurchase of shares (Note M)................. -- -- (450,900) (2,584,565) -- (2,584,565)
Net earnings for the year..................... -- -- -- -- 6,420,056 6,420,056
-- --- --------- ----------- ----------- -----------
Balance, December 31, 2000.................... -- $-- 6,474,140 $ 9,288,785 $48,211,889 $57,500,674
== === ========= =========== =========== ===========
The accompanying notes are an integral part of this statement.
F-5
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents
Cash Flows From Operating Activities
Net earnings............................................ $ 6,420,056 $ 4,653,083 $ 5,788,861
------------ ------------ ------------
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization............................... 8,772,064 8,822,260 7,927,663
Provision for losses on receivables......................... 314,000 282,100 217,500
Gain on disposition of property and equipment............... (1,345,307) (241,084) (103,110)
Amortization of unrecognized pension obligation............. 5,790 5,790 5,790
Provision for claims........................................ 2,150,171 2,635,771 4,703,340
Deferred income taxes....................................... 244,000 (346,000) 942,000
Charge associated with stock issuance to an officer......... 23,750 40,000 60,625
Changes in assets and liabilities...........................
Receivables................................................. (365,301) (2,669,188) (1,228,754)
Prepaid expenses............................................ 607,886 (89,668) (220,892)
Supplies inventory.......................................... (68,859) (108,719) 43,787
Other assets................................................ 52,100 (179,789) (52,044)
Accounts payable............................................ (507,370) 403,289 939,194
Accrued liabilities and claims.............................. (1,282,376) (2,285,240) (6,535,214)
Income taxes................................................ 315,435 742,579 60,385
------------ ------------ ------------
Total adjustments....................................... 8,915,983 7,012,101 6,760,270
------------ ------------ ------------
Net cash provided by operating activities............... 15,336,039 11,665,184 12,549,131
------------ ------------ ------------
Cash Flows From Investing Activities
Purchase of property and equipment.......................... (12,180,324) (16,764,220) (13,720,140)
Proceeds from disposition of property and equipment......... 3,240,381 761,809 1,160,558
Advances for purchase of real property...................... (2,291,262) -- --
------------ ------------ ------------
Net cash used in investing activities................... (11,231,205) (16,002,411) (12,559,582)
------------ ------------ ------------
Cash flows from financing activities
Repurchase of common stock.................................. (2,584,565) (308,450) --
Proceeds from issuance of long-term obligations............. 113,755 2,742,822 --
Principal payments on long-term obligations................. (109,152) (102,990) (1,091,597)
------------ ------------ ------------
Net cash provided by (used in) financing activities..... (2,579,962) 2,331,382 (1,091,597)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents........... 1,524,872 (2,005,845) (1,102,048)
Cash and cash equivalents at beginning of year................. 5,508,809 7,514,654 8,616,702
------------ ------------ ------------
Cash and cash equivalents at end of year....................... $ 7,033,681 $ 5,508,809 $ 7,514,654
============ ============ ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for..................................
Interest.................................................... $ 158,677 $ 137,953 $ 154,751
Income taxes................................................ 3,425,000 2,593,128 2,537,933
Noncash Investing And Financing Activities
During 2000, in connection with the 5,000 shares issued per the restricted
stock agreement, the Company recognized compensation expense of $23,750.
During 1999, in connection with the 5,000 shares issued per the restricted
stock agreement, the Company recognized compensation expense of $40,000 and
redeemed 2,180 shares valued at $17,440 as tax withholdings.
During 1998, in connection with the 5,000 shares issued per the restricted
stock agreement, the Company recognized compensation expense of $60,625 and
redeemed 2,180 shares valued at $26,433 as tax withholdings.
The accompanying notes are an integral part of these statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A--Summary Of Significant Accounting Policies
A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. Business Activity
The Company is a regional less-than-truckload carrier that provides
transportation and logistics services to shippers within its core service
region.
2. Principles Of Consolidation
The consolidated financial statements include the accounts of Motor Cargo
Industries, Inc. (MCI) and its wholly-owned subsidiary, Motor Cargo and its
wholly-owned subsidiaries, MC Leasing, Inc., MC Distribution Services, Inc. and
ICC, Inc. All significant intercompany accounts and transactions have been
eliminated in consolidation.
3. Financial Statement Presentation
In preparing the Company's financial statements, in accordance with
accounting principles generally accepted in the United States, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ significantly
from those estimates. Significant estimates include accrued claims and
allowance for doubtful accounts.
4. Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
5. Supplies Inventory
Supplies inventory consists primarily of fuel and equipment parts and is
stated at the lower of cost (first-in, first-out method) or market.
6. Depreciation and Amortization
Depreciation of property and equipment is provided on the straight-line
method over the estimated useful lives of the assets. Accelerated methods of
depreciation of property and equipment are used for income tax purposes.
Leasehold improvements are amortized over the lesser of the useful life of
the asset or term of the lease.
Maintenance, repairs, and renewals which neither materially add to the value
of the property nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of property and equipment are
included in earnings.
7. Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax bases
of assets and liabilities as measured by the currently enacted tax rates in
effect for the years in
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
which these differences are expected to reverse. Deferred tax expense or
benefit is the result of changes in deferred tax assets and liabilities.
8. Insurance Coverage and Accrued Claims
The Company is self-insured for health costs, cargo damage claims, and
automobile and general liability claims up to $70,000, $100,000 and $250,000,
respectively, per single occurrence. The Company also maintains workers'
compensation insurance, with no deductible except for the state of Nevada,
which deductible is $250,000 per occurrence.
The Company estimates and accrues a liability for its share of final
settlements using all available information including the services of a
third-party insurance risk claims administrator to assist in establishing
reserve levels for each occurrence based on the facts and circumstances of the
incident coupled with the Company's history of such claims. The Company accrues
for workers' compensation and automobile liabilities when reported, usually the
same day as the occurrence. Additionally, the Company accrues an estimated
liability for incurred but not reported claims. Expense depends upon actual
loss experience and changes in estimates of settlement amounts for open claims
which have not been fully resolved. The Company provides for adverse loss
developments in the period when new information becomes available.
9. Revenue Recognition
Freight charges are generally recognized as revenue in the period when the
shipment is complete or the services are rendered. Revenue from in-transit
freight is recognized on a percentage-of-completion basis, based on the average
transit time for that period. Expenses associated with the operating revenue
are recognized when incurred.
10. Prepaid Tires
The Company capitalizes tires purchased with new equipment and depreciates
them over the estimated useful life of the equipment (5-10 years). Replacement
tires are expensed upon placement into service.
11. Earnings Per Share
The Company follows the provisions of Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" (SFAS No. 128). SFAS No. 128 requires
the presentation of basic and diluted EPS. Basic EPS are calculated by dividing
earnings available to common shareholders by the weighted-average number of
common shares outstanding during each period. Diluted EPS are similarly
calculated, except that the weighted-average number of common shares
outstanding includes common shares that may be issued subject to existing
rights with dilutive potential.
12. Fair Value of Financial Instruments
The fair value of the Company's cash and cash equivalents, receivables,
accounts payable and accrued liabilities approximate carrying value due to the
short-term maturity of the instruments. The fair value of long-term obligations
approximate carrying value based on their effective interest rates compared to
current market prices.
13. Certain Reclassifications
Certain nonmaterial reclassifications have been made to the 1999 and 1998
financial statements to conform to the 2000 presentation.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note B--Receivables
Receivables consist of the following:
2000 1999
----------- -----------
Trade receivables.............................. $16,441,275 $17,004,970
Advances for purchase of real property (Note L) 1,503,567 --
Other receivables.............................. 719,791 210,707
----------- -----------
18,664,633 17,215,677
Allowance for doubtful accounts................ (539,703) (645,615)
----------- -----------
$18,124,930 $16,570,062
=========== ===========
The history of the allowance for doubtful accounts is as follows:
2000 1999 1998
--------- --------- ---------
Balance, beginning of year $ 645,615 $ 641,264 $ 572,801
Provisions for losses..... 314,000 282,100 217,500
Writeoffs, net............ (419,912) (277,749) (149,037)
--------- --------- ---------
Balance, end of year...... $ 539,703 $ 645,615 $ 641,264
========= ========= =========
Note C--Property and Equipment
Cost of property and equipment and estimated useful lives are as follows:
2000 1999 Years
------------ ----------- -------------
Land............................. $ 6,430,385 $ 7,130,385 --
Buildings........................ 17,599,772 18,492,100 20-45
Revenue equipment................ 57,549,237 56,850,948 5-10
Service cars and equipment....... 727,155 697,909 3-10
Shop and garage equipment........ 282,030 264,075 3-10
Office furniture and fixtures.... 2,831,581 2,670,329 3-10
Other property and equipment..... 10,731,472 9,904,137 3-10
Leasehold improvements........... 4,088,859 3,450,066 Life of lease
Construction in progress (Note L) 5,945,171 -- --
------------ -----------
$106,185,662 $99,459,949
============ ===========
Note D--Leases
The Company leases buildings and revenue equipment under operating lease
agreements. The following is a schedule of future minimum lease payments under
operating leases at December 31, 2000:
Year ending December 31, Buildings Equipment Total Leases
------------------------ ----------- ---------- ------------
2001............................ $ 1,867,800 $1,663,958 $ 3,531,758
2002............................ 1,198,525 1,470,307 2,668,832
2003............................ 1,076,972 1,450,420 2,527,392
2004............................ 1,013,926 1,154,301 2,168,227
2005............................ 955,615 1,137,271 2,092,886
Thereafter...................... 5,624,692 1,533,516 7,158,208
----------- ---------- -----------
Total minimum lease payments. $11,737,530 $8,409,773 $20,147,303
=========== ========== ===========
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The leases generally provide that property taxes, insurance, and maintenance
expenses are obligations of the Company. It is expected that in the normal
course of business, operating leases that expire will be renewed or replaced by
leases on other properties or equipment. The total rent expense for the years
ended December 31, 2000, 1999, and 1998, was approximately $4,270,000,
$3,043,000 and $2,365,000, respectively.
Note E--Revolving Bank Loan
The Company has a revolving bank loan. Under the loan agreement, borrowings
are limited to the lesser of 70 percent of allowable trade receivables, or
$5,000,000. Any outstanding amounts accrue interest at .25 percentage points
below the lending institution's prime rate, and are payable monthly. No
principal payments are required until maturity (April 2002) as long as the loan
does not exceed the required limits. The agreement is collateralized by cash
and cash equivalents, receivables, supplies inventory, and all documents,
instruments, and chattel paper now owned or hereafter acquired by the Company.
At December 31, 2000 and 1999, there were no draws against the loan.
The Company has an additional line of credit with a limit of $20,000,000 as
of December 31, 2000 and 1999. This line is collateralized by revenue
equipment. As of December 31, 2000 and 1999, there was $6,853,577 and
$6,739,822, respectively, drawn against the line (Note F).
Note F--Long-Term Obligations
Long-term obligations consist of the following:
2000 1999
---------- ----------
Prime less .25% (9.5% at December 31, 2000) note payable on a revolving
loan (up to $20,000,000) to a bank, due in 2002, interest payments due
monthly and unpaid balance of principal due in 2002, collateralized by
revenue equipment (Note E).............................................. $6,853,577 $6,739,822
8.75-8.85% notes payable to a corporation, due in 2003, payable in monthly
installments of $18,964, including interest, balloon payment of $971,258
due at maturity, collateralized by land and buildings................... 1,280,700 1,389,852
---------- ----------
8,134,277 8,129,674
Less current maturities................................................... 119,152 109,151
---------- ----------
$8,015,125 $8,020,523
========== ==========
Maturities of long-term obligations at December 31, 2000 are as follows:
Year ending December 31,
------------------------
2001............. $ 119,152
2002............. 6,983,647
2003............. 1,031,478
Thereafter....... --
----------
$8,134,277
==========
The revolving bank loan agreements contain various restrictive covenants
including provisions relating to the maintenance of net worth, earnings to debt
ratio, and liability insurance coverage. As of December 31, 2000, the Company
was in compliance with all covenants under the revolving bank loan agreements.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note G--Income Taxes
Income tax expense consists of the following:
2000 1999 1998
---------- ---------- ----------
Current.....................................
Federal.................................. $3,203,871 $2,825,541 $2,280,862
State.................................... 632,129 520,459 437,138
---------- ---------- ----------
3,836,000 3,346,000 2,718,000
---------- ---------- ----------
Deferred....................................
Federal.................................. 202,856 (287,744) 781,860
State.................................... 41,144 (58,256) 160,140
---------- ---------- ----------
244,000 (346,000) 942,000
---------- ---------- ----------
$4,080,000 $3,000,000 $3,660,000
========== ========== ==========
The income tax provision reconciled to the tax computed at the federal
statutory rate of 34 percent is as follows:
2000 1999 1998
---------- ---------- ----------
Federal income taxes at statutory rate........ $3,570,000 $2,602,000 $3,212,000
State income taxes, net of federal tax benefit 452,000 332,000 392,000
All other..................................... 58,000 66,000 56,000
---------- ---------- ----------
$4,080,000 $3,000,000 $3,660,000
========== ========== ==========
Deferred tax assets and liabilities consist of the following:
2000 1999
----------- -----------
Current deferred tax assets
Allowance for doubtful accounts.................. $ 206,000 $ 247,000
Vacation accrual................................. 640,000 572,000
Accrued claims................................... 582,000 609,000
Deferred revenue................................. 306,000 295,000
----------- -----------
Net current deferred tax asset...................... $ 1,734,000 $ 1,723,000
=========== ===========
Long-term deferred tax assets (liabilities).........
Unfunded pension................................. $ -- $ (35,000)
Accrued compensation............................. 203,000 111,000
Equipment temporary differences.................. (7,725,000) (7,343,000)
----------- -----------
Net long-term deferred tax liability................ $(7,522,000) $(7,267,000)
=========== ===========
The Company's deferred tax assets result from temporary timing differences
between financial and tax reporting standards. For accrued expenses, the
deferred tax assets are expected to reverse in the period the Company pays the
expenses. For the allowance for doubtful accounts, the deferred tax asset
reverses when the accounts are written off. Finally, the deferred tax asset for
deferred revenue reverses when the Company recognizes the revenue for financial
reporting purposes. Considering the Company's history of positive earnings, no
valuation allowance against the deferred tax assets is considered necessary.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note H--Employee Benefit Plans
1. Pension Plan
The Company participates in a defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of service
and hours of service in the current year. A participant is fully vested after
five years. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected benefits to be
earned in the future. Information pertaining to the activity in the plan is as
follows:
Pension Benefits
----------------------------------
2000 1999 1998
---------- ---------- ----------
Change in benefit obligation......................
Benefit obligation at beginning of year........ $5,689,892 $5,449,623 $4,413,501
Service cost................................... 321,147 407,540 268,884
Interest cost.................................. 419,407 348,756 346,433
Actuarial loss (gain).......................... (366,697) (347,746) 586,993
Benefits paid.................................. (195,598) (168,281) (166,188)
---------- ---------- ----------
Benefit obligation at end of year.............. $5,868,151 $5,689,892 $5,449,623
========== ========== ==========
Change in plan assets.............................
Fair value of plan assets at beginning of year. $6,236,581 $5,328,226 $4,929,225
Actual return on plan assets................... (337,970) 837,636 440,189
Employer contribution.......................... 328,000 239,000 125,000
Benefits paid.................................. (195,598) (168,281) (166,188)
---------- ---------- ----------
Fair value of plan assets at end of year....... $6,031,013 $6,236,581 $5,328,226
========== ========== ==========
Funded status.....................................
Plan assets over (under) benefit obligation.... $ 162,862 $ 546,669 $ (121,397)
Unrecognized net actuarial gain................ (393,798) (950,210) (206,611)
Unrecognized net transition amount............. 52,281 58,071 63,861
---------- ---------- ----------
Accrued pension cost........................... $ (178,655) $ (345,470) $ (264,147)
========== ========== ==========
The components of net periodic pension cost are as follows:
2000 1999 1998
--------- --------- ---------
Service cost................................ $ 321,147 $ 407,540 $ 268,884
Interest cost............................... 419,407 348,756 346,433
Expected return on plan assets.............. (585,159) (441,763) (440,189)
Amortization of prior service cost.......... 5,790 5,790 4,588
--------- --------- ---------
Net periodic pension cost................... $ 161,185 $ 320,323 $ 179,716
========= ========= =========
Weighted-average assumptions as of December 31,
Discount rate............................... 7.50% 7.50 % 6.50%
Expected return on plan assets.............. 8.00% 8.00 % 6.50%
Rate of compensation increase............... -- -- --
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. 401(k) Profit-sharing Plan
The Company has a qualified 401(k) profit-sharing plan (the Plan) for its
employees. All employees who have completed one year of service with the
Company are eligible to participate in the Plan. Under the Plan, employees are
allowed to make contributions of between 1 percent and 15 percent of their
annual compensation. The Company matches certain percentages of employee
contributions up to 6 percent of the employee's annual compensation, depending
on the Company's operating ratio. All amounts contributed by a participant are
fully vested at all times. A participant becomes vested over time and is fully
vested in any Company matching contributions after 7 years of service. Expenses
for Company contributions approximated $495,000, $421,000 and $475,000, for the
years ended December 31, 2000, 1999 and 1998, respectively.
Note I--Stock Options
In January of 1999, the Company's Board of Directors and shareholders
adopted the Motor Cargo Industries, Inc. 1999 Stock Option Plan for
non-employee Directors (the 1999 Option Plan). The Company reserved 100,000
shares of common stock under the 1999 Option Plan. Accordingly, the Board of
Directors has approved the granting of options under the Option Plan as follows:
Non-employee Directors have been granted options to acquire 35,000 shares of
common stock. The options were granted at $7.50 per share, which was the market
price of the Company's common shares on the day of grant. The options vest
periodically through January 2003 and expire in 2010.
In October 1997, the Company's Board of Directors and shareholders adopted
the Motor Cargo Industries, Inc. 1997 Stock Option Plan (the 1997 Option Plan).
The Company reserved 500,000 shares of common stock under the 1997 Option Plan.
Accordingly, the Board of Directors has approved the granting of options under
the Option Plan as follows:
Directors, officers and key employees have been granted options to acquire
365,000 shares of common stock. The options were originally granted at $12.00
to $12.50 per share, which was the market price of the Company's common shares
on the date granted. The options vest periodically through January of 2003. The
options expire upon the earlier of an expiration date fixed by the committee
responsible for the administering of the Plan or 10 years from the date of the
grant.
During 1999, all original stock option agreements under the 1997 Option Plan
were canceled and new options were granted at an exercise price of $7.50 per
share, which was the market price of the Company's common stock on the date
reissued. Because of the immediate reissuance of the new options at a reduced
exercise price, the reissued options are accounted for as variable stock
options under APB Opinion No. 25. Variable stock options require compensation
cost to be adjusted at the end of each reporting period based on the change in
the intrinsic value of the variable stock options. As of December 31, 2000, no
adjustment to compensation cost is necessary.
During 2000, the Company granted an additional 41,300 options under the 1997
Option Plan. These options were granted at an exercise price of $4.69, which
was the market price of the Company's common shares on the date granted. The
options vest periodically through February of 2004. The options expire upon the
earlier of an expiration date fixed by the committee responsible for
administering the Plan or 10 years from the date of the grant.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Changes to the Company's stock options are as follows:
Exercise price Weighted-average
Stock options per share exercise price
------------- --------------- ----------------
Outstanding at
January 1, 1998... 249,500 $ 12.00 $12.00
Granted........... 42,000 12.50 12.50
Exercised......... -- -- --
Canceled/expired.. -- -- --
--------
Outstanding at
December 31, 1998. 291,500 12.00 to 12.50 12.07
Granted........... 400,000 7.50 7.50
Exercised......... -- -- --
Canceled/expired.. (291,500) 12.00 to 12.50 12.07
--------
Outstanding at
December 31, 1999. 400,000 7.50 7.50
Granted........... 41,300 4.69 4.69
Exercised......... -- -- --
Canceled/expired.. (85,000) 4.69 to 7.50 7.37
--------
Outstanding at
December 31, 2000. 356,300 $4.69 to 7.50 $ 7.21
======== =============== ======
Exercisable at
December 31, 2000. 79,750 $ 7.50 $ 7.50
======== =============== ======
No stock options were exercisable at December 31, 1999. 62,375 stock options
were exercisable at $12.00 per share at December 31, 1998.
Additional information about stock options outstanding and exercisable at
December 31, 2000 is as follows:
Options Outstanding
Weighted- Weighted-average
Number average exercise remaining contractual
Exercise price outstanding price life (years)
-------------- ----------- ---------------- ---------------------
$4.69 41,300 $4.69 9.1
$7.50 315,000 $7.50 8.1
-------
356,300
=======
Options Exercisable
Number Weighted-average
Exercise price exercisable exercise price
-------------- ----------- ----------------
$7.50 79,750 $7.50
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Market Value Of Options Granted
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS
123). Therefore, the Company accounts for stock based compensation under
Accounting Principles Board Opinion No. 25, under which no significant
compensation cost has been recognized. Had the compensation cost for the stock
based compensation been determined based upon the fair value of the options at
the grant date consistent with the methodology prescribed by FAS 123, the
Company's net earnings and earnings per share would have been reduced to the
following pro forma amounts:
2000 1999 1998
---------- ---------- ----------
Net earnings..........................
As reported........................ $6,420,056 $4,653,083 $5,788,861
Pro forma.......................... 6,122,235 4,326,056 5,337,141
Net earnings per common share--basic..
Net earnings....................... $ 0.95 $ 0.67 $ 0.83
Pro forma.......................... 0.91 0.62 0.76
Net earnings per common share--diluted
Net earnings....................... $ 0.95 $ 0.67 $ 0.83
Pro forma.......................... 0.91 0.62 0.76
The fair value of these options was estimated at the date of grant using the
Black-Scholes American option-pricing model with the following weighted-average
assumptions for 2000, 1999 and 1998, respectively: expected volatility of 78,
79 and 67 percent; risk-free interest rate of 6.68, 5.03 and 5.65 percent; and
expected life of 7.5 for each of the three years. The weighted-average fair
value of options granted was $3.65, $5.79 and $8.90 in 2000, 1999 and 1998,
respectively.
Option pricing models require the input of highly sensitive assumptions,
including the expected stock price volatility. Also, the Company's stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially affect
the fair value estimate. Management believes the best input assumptions
available were used to value the options and that the resulting option values
are reasonable.
Note J--Earnings Per Common Share
2000 1999 1998
--------- --------- ---------
Common shares outstanding at beginning of period............ 6,925,040 6,987,820 6,990,000
Weighted average common shares issued during the period..... -- -- --
Weighted average common shares repurchased during the period (190,306) (49,455) (2,180)
--------- --------- ---------
Weighted average number of common shares used in basic EPS.. 6,734,734 6,938,365 6,987,820
Dilutive effect of stock options............................ 4,032 2,291 4,000
--------- --------- ---------
Weighted average number of common shares and dilutive
potential common stock used in diluted EPS................ 6,738,766 6,940,656 6,991,820
========= ========= =========
Note K--Deferred Compensation
The Company has salary continuation agreements with certain key management
employees. Under the agreements, the Company is obligated to provide for each
such employee or his beneficiaries, during a period of not more than ten years
after the employee's death, disability, or retirement, annual benefits ranging
from $17,000 to $23,000. The Company has purchased universal life insurance
policies on the lives of these participants. These insurance policies, which
remain the sole property of the Company, are payable to the Company upon the
death of the participant or maturity of the insurance policy.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company separately contracts with the participants to pay stated
benefits substantially equivalent to those received or available under the
insurance policies upon retirement, death, or permanent disability. The expense
incurred for the years ended December 31, 2000, 1999 and 1998, was
approximately $64,000, $58,000 and $54,000, respectively.
Note L--Commitments and Contingencies
1. Purchase of Property and Equipment
During 2000, the Company made advances toward the purchase of property and
the construction of a new terminal in Denver, Colorado. In December 2000, the
Company sold a vacant terminal in Newark, California, resulting in a gain of
$1,139,247, which is included in other income. To facilitate an income
tax-deferred exchange relating to these two terminals, the Company placed the
proceeds from the sale of the Newark, California terminal in an escrow account
until the completion of construction of the Denver terminal.
At December 31, 2000, the Company included $4,285,650 incurred on the
construction of the Denver terminal in construction in progress. Funds
remaining in escrow at December 31, 2000 total $2,291,262. Of these funds,
$787,695 is committed under the construction contract and is included in other
assets. The remaining $1,503,567 in escrow represents advanced costs in excess
of the amounts committed under the construction contract that will be returned
to the Company and is included in receivables.
At December 31, 2000, the Company has outstanding purchase orders for
revenue equipment totaling approximately $6,143,000.
2. Letters of Credit
At December 31, 2000, the Company had outstanding letters of credit totaling
$1,430,000 ($1,280,000 at December 31, 1999). There were no draws against these
letters of credit during any of the periods presented.
3. Litigation
The Company is involved in litigation arising in the normal course of
business. It is not possible to state the ultimate liability, if any, in these
matters. In the opinion of management, such litigation will have no material
effect on the financial position and results of operations of the Company, in
excess of amounts accrued.
Note M--Capital Transactions
In October 1997, the Company's Board of Directors awarded an officer of the
Company 20,000 shares of the Company's common stock. The award was made
pursuant to a Restricted Stock Agreement which states that 20,000 shares of the
Company's common stock will be issued in the officer's name. The Company will
hold the certificates for the shares, which will be released in four
installments, each consisting of 25 percent of the shares issued based on the
officer's continued employment. In the event the officer voluntarily ceases his
employment with the Company or the Company terminates his employment for cause,
the shares not previously released will be forfeited. Termination of employment
by the Company without cause, or termination due to disability or death will
result in the prompt release of some or all shares not previously released,
depending upon the date of the relevant event. During 2000, 1999 and 1998,
5,000 shares vested annually, resulting in compensation expense in the amount
of $23,750, $40,000 and $60,625, respectively. Of the 5,000 shares vested
during 1999, 2,180 shares were simultaneously redeemed by the Company. The
remaining 2,820 shares were released to the officer's name. All of the 5,000
shares vested during 2000 were released to the officer's name.
During the first quarter of 1999, the Company announced a share repurchase
program. The Board of Directors of the Company authorized the repurchase of up
to 700,000 shares of outstanding common stock. As of December 31, 2000, a total
of 511,500 shares had been repurchased by the Company for approximately
$2,893,000.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note N--Accrued Liabilities
Accrued liabilities consist of the following:
2000 1999
---------- ----------
Salaries, wages, and payroll taxes.................... $3,361,440 $2,611,473
Accrued employee benefits............................. 1,471,197 1,353,340
Vacation accrual...................................... 1,671,317 1,498,511
All other............................................. 973,889 859,771
---------- ----------
$7,477,843 $6,323,095
========== ==========
Note O--Accrued Claims
The history of accrued claims is as follows
2000 1999 1998
----------- ----------- -----------
Balance at beginning of year........... $ 1,727,391 $ 1,382,085 $ 2,956,911
Provision.............................. 2,150,171 2,635,711 4,703,340
Claims................................. (2,437,124) (2,290,405) (6,278,166)
----------- ----------- -----------
Balance at end of year................. $ 1,440,438 $ 1,727,391 $ 1,382,085
=========== =========== ===========
Note P--Quarterly Financial Results (Unaudited)
Quarterly financial results for the years ended December 31, 2000 and 1999
are as follows:
Earnings per Earnings per
Operating Operating common common
2000 revenues income Net earnings share--basic(2) share--diluted(2)
---- ------------ ---------- ------------ --------------- -----------------
First quarter......................................... $ 30,382,899 $1,096,810 $ 672,011 $0.10 $0.10
Second quarter........................................ 31,773,871 2,674,895 1,635,128 0.24 0.24
Third quarter......................................... 34,097,502 2,789,605 1,715,278 0.26 0.26
Fourth quarter(1)..................................... 34,857,422 3,108,496 2,397,639 0.37 0.37
------------ ---------- ----------
$131,111,694 $9,669,806 $6,420,056 $0.95 $0.95
============ ========== ========== ===== =====
Earnings per Earnings per
Operating Operating common common
1999 revenues income Net earnings share--basic(2) share--diluted(2)
---- ------------ ---------- ------------ --------------- -----------------
First quarter......................................... $ 28,730,830 $1,192,608 $ 721,206 $0.10 $0.10
Second quarter........................................ 32,353,017 2,455,998 1,497,638 0.22 0.22
Third quarter......................................... 32,614,188 1,852,961 1,120,273 0.16 0.16
Fourth quarter........................................ 31,611,598 2,180,297 1,313,966 0.19 0.19
------------ ---------- ----------
$125,309,633 $7,681,864 $4,653,083 $0.67 $0.67
============ ========== ========== ===== =====
--------
(1) Fourth quarter 2000 net earnings includes unusual items comprised
primarily of a net gain of approximately $541,000 resulting from the sale
of a terminal during that quarter.
(2) Earnings per common share is computed independently for each of the
quarters presented. Therefore, due to rounding, the sum of the quarterly
earnings per common share do not necessarily equal the total for the year.
F-17
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000 (AUDITED)
September 30, December 31,
2001 2000
------------- ------------
(unaudited) (audited)
ASSETS
Current assets
Cash and cash equivalents.............................................. $ 5,783,372 $ 7,033,681
Receivables, net....................................................... 18,260,110 18,124,930
Prepaid expenses....................................................... 1,718,077 2,112,198
Supplies inventory..................................................... 607,953 637,289
Deferred income taxes.................................................. 1,734,000 1,734,000
------------ ------------
Total current assets............................................... 28,103,512 29,642,098
Property and equipment, at cost........................................... 109,858,794 106,185,662
Less accumulated depreciation and amortization......................... 52,337,269 51,851,119
------------ ------------
57,521,525 54,334,543
Other assets
Advances for purchase of real property................................. -- 787,695
Deferred charges....................................................... 543,878 548,271
Other, net............................................................. 52,281 52,281
------------ ------------
596,159 1,388,247
------------ ------------
$ 86,221,196 $ 85,364,888
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations............................ $ 127,250 $ 119,152
Accounts payable....................................................... 3,435,485 2,854,290
Accrued liabilities.................................................... 8,608,672 7,477,843
Accrued income taxes................................................... 1,810,524 435,366
Accrued claims......................................................... 1,480,377 1,440,438
------------ ------------
Total current liabilities.......................................... 15,462,308 12,327,089
Long-term obligations, less current maturities............................ 1,065,073 8,015,125
Deferred income taxes..................................................... 7,522,000 7,522,000
Commitments and contingencies............................................. -- --
Shareholders' equity
Preferred stock, no par value; Authorized--25,000,000
shares--none issued.................................................. -- --
Common stock, no par value; Authorized--100,000,000 shares; issued
6,473,140 shares as of September 30, 2001 and 6,474,140 shares as of
December 31, 2000.................................................... 9,315,031 9,288,785
Retained earnings...................................................... 52,856,784 48,211,889
------------ ------------
62,171,815 57,500,674
------------ ------------
$ 86,221,196 $ 85,364,888
============ ============
The accompanying notes are an integral part of these statements.
F-18
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
2001 2000 2001 2000
----------- ----------- ------------ -----------
(unaudited) (unaudited)
Operating revenue....................... $36,040,782 $34,097,502 $103,744,650 $96,254,272
----------- ----------- ------------ -----------
Operating expenses
Salaries, wages and benefits......... 18,057,408 16,922,303 53,312,237 47,893,682
Operating supplies and expenses...... 5,605,560 5,656,904 16,569,231 15,747,849
Purchased transportation............. 3,170,857 3,000,011 8,732,073 8,849,229
Operating taxes and licenses......... 1,363,792 1,326,113 3,886,913 3,742,780
Insurance and claims................. 1,065,463 856,627 2,951,175 2,608,140
Depreciation and amortization........ 2,243,027 2,144,094 6,633,200 6,640,678
Communications and utilities......... 495,637 582,729 1,581,432 1,600,776
Building rents....................... 761,444 881,039 2,313,642 2,607,311
Loss (gain) on sale of equipment..... (42,688) (61,923) 4,524 (151,790)
Other non-recurring expense.......... -- -- -- 102,596
----------- ----------- ------------ -----------
Total operating expenses......... 32,720,500 31,307,897 95,984,427 89,641,251
Operating income................. 3,320,282 2,789,605 7,760,223 6,613,021
Other income (expense)
Interest expense..................... (27,711) (33,035) (91,386) (121,362)
Other, net........................... 32,502 46,549 113,566 97,430
----------- ----------- ------------ -----------
Total other...................... 4,791 13,514 22,180 (23,932)
----------- ----------- ------------ -----------
Earnings before income taxes..... 3,325,073 2,803,119 7,782,403 6,589,089
Income taxes............................ 1,321,986 1,087,841 3,137,508 2,566,672
----------- ----------- ------------ -----------
Net earnings..................... $ 2,003,087 $ 1,715,278 $ 4,644,895 $ 4,022,417
=========== =========== ============ ===========
Earnings per share: (note 2)
Basic................................ $ 0.31 $ 0.26 $ 0.72 $ 0.59
Diluted.............................. 0.31 0.26 0.71 0.59
Weighted-average shares outstanding:
Basic................................ 6,473,140 6,720,693 6,473,177 6,796,755
Diluted.............................. 6,530,224 6,724,973 6,517,402 6,799,258
The accompanying notes are an integral part of these statements.
F-19
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
------------------------------
2001 2000
----------- -----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings................................................................... $ 4,644,895 $ 4,022,417
----------- -----------
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization.................................................. 6,633,200 6,640,678
Provision for losses on receivables............................................ 458,000 195,500
Loss (gain) on disposition of property and equipment........................... 4,524 (151,790)
Variable stock option expense.................................................. 281,376 --
Charge associated with stock issuance to an officer............................ 33,750 23,750
Provision for claims........................................................... 2,258,199 2,159,209
Deferred income taxes.......................................................... -- (1,917)
Changes in assets and liabilities
Receivables................................................................. (832,930) (699,524)
Prepaid expenses............................................................ 394,121 723,597
Supplies inventory.......................................................... 29,336 94,852
Accrued income taxes........................................................ 1,375,158 303,373
Other assets................................................................ (1,277) 65,630
Accounts payable............................................................ 581,195 (1,162,805)
Accrued liabilities and claims.............................................. (1,368,807) (853,911)
----------- -----------
Total adjustments....................................................... 9,845,845 7,336,642
----------- -----------
Net cash provided by operating activities............................... 14,490,740 11,359,059
----------- -----------
Cash flows from investing activities
Note receivable.................................................................... -- (2,319,395)
Purchase of property and equipment................................................. (9,232,391) (5,419,506)
Proceeds from disposition of property and equipment................................ 440,800 574,851
----------- -----------
Net cash used in investing activities................................... (8,791,591) (7,164,050)
----------- -----------
Cash flows from financing activities
Repurchase of common stock......................................................... (7,504) (1,409,762)
Principal payments on long-term obligations........................................ (6,941,954) (3,823,207)
----------- -----------
Net cash used in financing activities................................... (6,949,458) (5,232,969)
----------- -----------
Net decrease in cash and cash equivalents............................... (1,250,309) (1,037,960)
Cash and cash equivalents at beginning of period...................................... 7,033,681 5,508,809
----------- -----------
Cash and cash equivalents at end of period............................................ $ 5,783,372 $ 4,470,849
=========== ===========
Supplemental cash flow information
Cash paid during the period for:
Interest........................................................................... $ 94,515 $ 118,562
Income taxes....................................................................... 1,972,150 2,259,050
Non-cash Investing and Financing Activities
During 2001, the Company recorded a $787,695 noncash application of advances
made in 2000 for the purchase of real property. Additionally, the Company
recorded a $239,750 noncash transfer from receivables to real property.
During 2001, in connection with the vesting of 5,000 shares pursuant to a
restricted stock agreement, the Company recognized compensation expense of
$33,750.
During 2000, in connection with the vesting of 5,000 shares pursuant to a
restricted stock agreement, the Company recognized compensation expense of
$23,750.
The accompanying notes are an integral part of these statements.
F-20
MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Interim Consolidated Financial Statements
The interim consolidated financial information included herein is unaudited;
however, the information reflects all adjustments (consisting of normal
recurring adjustments) that are, in the opinion of management, necessary for
the fair presentation of the consolidated financial position, results of
operations, and cash flows for the interim periods. The consolidated financial
statements should be read in conjunction with the Notes to consolidated
financial statements included in the audited consolidated financial statements
for Motor Cargo Industries, Inc. (the "Company") for the year ended December
31, 2000, which are included in the Company's Annual Report on Form 10-K for
such year (the "2000 10-K"). Results of operations for interim periods are not
necessarily indicative of annual results of operations. The consolidated
balance sheet at December 31, 2000 was extracted from the Company's audited
consolidated financial statements contained in the 2000 10-K and does not
include all disclosures required by generally accepted accounting principles
for annual consolidated financial statements.
2. Earnings Per Share
Basic earnings per common share ("EPS") are based on the weighted average
number of common shares outstanding during each such period. Diluted earnings
per common share are based on shares outstanding (computed under basic EPS) and
potentially dilutive common shares. Potential common shares included in
dilutive earnings per share calculations include stock options granted but not
exercised. A reconciliation of weighted-average shares outstanding is presented
below:
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net earnings................................ $2,003,087 $1,715,278 $4,644,895 $4,022,417
Weighted-average shares outstanding--basic.. 6,473,140 6,720,693 6,473,177 6,796,755
Effect of dilutive stock options............ 57,084 4,280 44,225 2,503
Weighted-average shares outstanding--diluted 6,530,224 6,724,973 6,517,402 6,799,258
3. Pending Merger
On October 15, 2001, the Company, Union Pacific Corporation, a Utah
corporation ("Union Pacific"), and Motor Merger Co., a Utah corporation and
wholly-owned subsidiary of Union Pacific ("Merger Sub"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the terms of
the Merger Agreement, Union Pacific will offer to exchange for each share of
common stock, no par value, of the Company's stock at the election of the
holder, either 0.26 of a share of common stock, par value $2.50 per share, of
Union Pacific ("Union Pacific Stock") or $12.10 in cash. Pursuant to the terms
of the shareholder agreements, dated as of October 15, 2001, Messrs. Harold R.
Tate and Marvin L. Friedland, who collectively own approximately 62.5% of the
outstanding shares of the Company's stock, have agreed to tender their shares
in the exchange offer. After the consummation of the exchange offer, the
Company will be merged with and into Merger Sub. Holders of the Company stock
who do not elect to tender their shares in the exchange offer will receive
$12.10 per share upon consummation of the merger.
F-21
ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS OF UNION PACIFIC CORPORATION
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of Union Pacific. Except as noted, each of the executive
officers and directors named in the table below has held the indicated office
or position in his or her principal occupation for at least five years. Each
person listed below held the earliest indicated office or position as of at
least five years ago. Except as noted, each person identified below is a United
States citizen. The principal business address of Union Pacific and, unless
otherwise indicated, the business address of each person identified below is
1416 Dodge Street, Omaha, Nebraska 68179.
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Richard K. Davidson Chairman, President and Chief Executive Officer of Union Pacific and
Chairman and Chief Executive Officer of Union Pacific Railroad Company, a
subsidiary of Union Pacific. Director of Union Pacific since 1994. Mr.
Davidson was Chairman of Union Pacific Railroad until November 6, 1996
and Chairman and Chief Executive Officer of Union Pacific Railroad since
such date. Mr. Davidson has also been President and Chief Operating Officer
of Union Pacific since November 1, 1995 and Chairman, President and Chief
Executive Officer of Union Pacific since January 1, 1997. Age 59.
James R. Young Executive Vice President--Finance of Union Pacific and Chief Financial
Officer of the Union Pacific Railroad. Mr. Young was elected Executive Vice
President-Finance of Union Pacific and Chief Financial Officer of Union
Pacific Railroad effective December 1, 1999. Mr. Young was elected
Controller of Union Pacific and Senior Vice President--Finance of Union
Pacific Railroad effective March 1999 and Senior Vice President--Finance of
Union Pacific effective June 1998. Mr. Young served as Treasurer of Union
Pacific Railroad from June 1998 to March 1999. Mr. Young was Vice
President--Customer Service Planning and Quality of Union Pacific Railroad
from April 1998 to June 1998, Vice President--Quality and Operations
Planning from September 1997 to April 1998 and Vice President--Finance
and Quality from September 1995 to September 1997. Age 49.
L. Merill Bryan, Jr. Senior Vice President and Chief Information Officer of Union Pacific.
Mr. Bryan was elected to his current position effective May 2001 and served
as Senior Vice President--Information Technologies from May 1997 to May
2001. Prior thereto, Mr. Bryan was President and Chief Executive Officer of
Union Pacific Technologies, Inc., a former subsidiary of Union Pacific.
Age 57.
Barbara W. Schaefer Senior Vice President--Human Resources of Union Pacific. Ms. Schaefer
was elected to her current position effective April 1997. From April 1994 to
April 1997 Ms. Schaefer was Vice President--Human Resources of Union
Pacific Railroad. Age 48.
Robert W. Turner Senior Vice President--Corporate Relations of Union Pacific. Mr. Turner was
elected to his current position effective August 2000. Prior thereto, Mr.
Turner was Vice President--Public Affairs of Champion International
Corporation, a paper and forest products company. Age 52.
A-1
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Carl W. von Bernuth Senior Vice President, General Counsel and Secretary of Union Pacific.
Mr. von Bernuth was elected Corporate Secretary effective April 1997.
Mr. von Bernuth has been Senior Vice President and General Counsel during
the past five years. Age 57.
Charles R. Eisele Senior Vice President of Union Pacific. Mr. Eisele was elected to his current
position effective September 2001. Mr. Eisele was Vice President--Strategic
Planning from September 1997 to March 1999 and Vice President--Strategic
Planning from March 1999 to September 2001. Mr. Eisele was Vice
President--Purchasing for Union Pacific Railroad from April 1994 to
September 1997. Age 51.
Bernie R. Gutschewski Vice President--Taxes of Union Pacific. Mr. Gutschewski was elected Vice
President--Taxes effective August 1998. Prior thereto, Mr. Gutschewski was
Assistant Vice President--Tax and Financial Management of Union Pacific
Railroad. Age 51.
Mary E. McAuliffe Vice President--External Relations of Union Pacific during the past five
years. Age 55.
Richard J. Putz Vice President and Controller of Union Pacific. Mr. Putz was elected Vice
President and Controller of Union Pacific and Chief Accounting Officer of
Union Pacific Railroad effective December 1, 1999. Prior thereto, Mr. Putz
was Assistant Vice President and Controller of Union Pacific Railroad.
Age 54.
Mary S. Jones Vice President and Treasurer of Union Pacific. Ms. Jones was elected to her
current position effective March 1999. Ms. Jones served as Vice President--
Investor Relations from June 1998 to March 1999. Ms. Jones was Assistant
Vice President--Treasury and Assistant Treasurer of Union Pacific from
September 1996 to June 1998 and prior thereto she was Assistant Treasurer of
Union Pacific. Age 49.
Ivor J. Evans President and Chief Operating Officer of Union Pacific Railroad. Mr. Evans
was elected to his current position effective September 1998. Prior thereto,
Mr. Evans was Senior Vice President of Emerson Electric Company, a
company engaged in the design, manufacture and sale of electrical,
electromechanical, and electronic products and systems. Director of Union
Pacific since 1999. Age 59.
Dennis J. Duffy Executive Vice President--Operations of Union Pacific Railroad. Mr. Duffy
was elected to his current position effective September 1998. Mr. Duffy was
Senior Vice President--Safety Assurance and Compliance Process from
October 1997 to September 1998. Mr. Duffy was Senior Vice President--
Customer Service and Planning of Union Pacific Railroad from November
1995 to October 1997. Age 50.
John J. Koraleski Executive Vice President--Marketing and Sales of the Union Pacific
Railroad. Mr. Koraleski was elected to this position effective March 1999.
Mr. Koraleski served as Controller of Union Pacific from August 1998 to
March 1999 and as Executive Vice President--Finance of Union Pacific
Railroad from May 1996 to March 1999. Prior to May 1996, Mr. Koraleski
was Executive Vice President--Finance and Information Technologies of
Union Pacific Railroad. Age 50.
A-2
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
R. Bradley King Executive Vice President - Network Design and Integration of Union Pacific
Railroad. Mr. King was elected to his current position effective September
1998. Mr. King was Executive Vice President--Operations from October
1997 to September 1998. Mr. King was Vice President--Transportation of
Union Pacific Railroad from November 1995 to October 1997. Age 53.
Leo H. Suggs Chairman and Chief Executive Officer of Overnite Transportation Company.
Mr. Suggs was elected to his current position in April 1996. Prior thereto, Mr.
Suggs was President and Chief Executive Officer of Preston Trucking
Company, Inc., a company engaged in truck transportation. Age 62.
Philip F. Anschutz Director and Vice Chairman of Union Pacific since 1996. Chairman of the
Board, Chief Executive Officer and a director, The Anschutz Corporation and
Anschutz Company (the corporate parent of The Anschutz Corporation), with
holdings in energy, transportation, communications, professional sports,
agriculture and real estate, Denver, CO. Director, Forest Oil Corporation,
Qwest Communications International Inc. Mr. Anschutz also served as
President of The Anschutz Corporation and Anschutz Company until
December 1996, and non-executive Chairman and a director of Southern
Pacific Rail Corporation until September 1996. Age 61. Mr. Anschutz's
business address is The Anschutz Corporation, 555 17th Street, Denver, CO
80202.
E. Virgil Conway Director of Union Pacific since 1978. Former Chairman and a member of the
Board, Metropolitan Transportation Authority, public transportation, New
York, NY. Director, Accuhealth, Inc., Centennial Insurance Company.
Trustee, Atlantic Mutual Insurance Company, Consolidated Edison Company
of New York, Inc., Urstadt Biddle Properties, Inc., Mutual Funds Managed by
Phoenix Duff & Phelps. Age 72. Mr. Conway's business address is 101 Park
Avenue, New York, NY 10178.
Thomas J. Donohue Director of Union Pacific since 1998. President and Chief Executive Officer,
U.S. Chamber of Commerce, business federation, Washington, DC. Director,
Qwest Communications International Inc., Sunrise Assisted Living, Inc., XM
Satellite Radio. Mr. Donohue was President and Chief Executive Officer of
the American Trucking Associations, the national organization of the trucking
industry, through September 1997 and since such date has been President and
Chief Executive Officer of the U.S. Chamber of Commerce. Age 63. Mr.
Donohue's business address is U.S. Chamber of Commerce, 1615 "H" Street,
N.W., Washington, DC 20062-2000.
Archie W. Dunham Director of Union Pacific since 2000. Chairman, President and Chief
Executive Officer, Conoco Inc., integrated energy company, Houston, TX.
Director, Louisiana-Pacific Corporation, Phelps Dodge Corporation. Mr.
Dunham was Executive Vice President, Exploration Production, of Conoco to
January 1996 when he became President and Chief Executive Officer, and
added the title of Chairman in August 1999. Age 62. Mr. Dunham's business
address is Conoco Inc., 600 North Dairy Ashford Road, Houston, TX
77079-1175.
A-3
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Spencer F. Eccles Director of Union Pacific since 1976. Chairman, Wells Fargo Intermountain
Banking Region, diversified financial services company, Salt Lake City, UT.
Director, Wells Fargo & Company, U.S. Chamber of Commerce. Mr. Eccles
was Chairman and Chief Executive Officer of First Security Corporation,
bank holding company, through October 26, 2000 and has been Chairman of
Wells Fargo Intermountain Banking Region since such date. Age 67.
Mr. Eccles' business address is Wells Fargo Intermountain Banking Region,
P.O. Box 30006, Salt Lake City, UT 84130.
Elbridge T. Gerry, Jr. Director of Union Pacific since 1986. Partner, Brown Brothers Harriman &
Co., bankers, New York, NY. Age 68. Mr. Gerry's business address is Brown
Brothers Harriman & Co., 59 Wall Street, New York, NY 10005.
Judith Richards Hope Director of Union Pacific since 1988. Partner, Paul, Hastings, Janofsky &
Walker, law firm, Los Angeles, CA, New York, NY and Washington, DC.
Director, The Budd Company, General Mills, Inc., Russell Reynolds
Associates, Zurich Insurance Companies-U.S. Ms. Hope was Senior Partner
of Paul, Hastings, Janofsky & Walker through April 1997, Senior Counsel to
such firm to February 1, 2000 and on April 28, 2000, was appointed a non-
equity Partner, effective February 1, 2000. Age 60. Ms. Hope's business
address is Paul, Hastings, Janofsky & Walker, 1299 Pennsylvania Ave.,
N.W., Washington, DC 20004.
Richard J. Mahoney Director of Union Pacific since 1991. Retired Chairman and Chief Executive
Officer, Monsanto Company, agricultural products, St. Louis, MO.
Distinguished Executive in Residence, Center for the Study of American
Business, Washington University, St. Louis, MO. Advisory Director,
Metropolitan Life Insurance Company. Mr. Mahoney was Chairman of the
Executive Committee and a director of Monsanto Company through March
1996 and since April 1, 1995 has been Distinguished Executive in Residence
at Washington University in St. Louis. Age 67. Mr. Mahoney's business
address is Center for the Study of American Business, Washington University
in St. Louis, Campus Box 1027, One Brookings Drive, St. Louis, MO
63130-4899.
Steven R. Rogel Director of Union Pacific since 2000. Chairman, President and Chief
Executive Officer, Weyerhaeuser Company, integrated forest products
company, Federal Way, WA. Director, Kroger Company. Mr. Rogel was
President and Chief Executive Officer of Willamette Industries, Inc.,
integrated forest products company, to December 1, 1997, President and
Chief Executive Officer of Weyerhaeuser Company to April 20, 1999 and
Chairman, President and Chief Executive Officer of Weyerhaeuser since such
date. Age 59. Mr. Rogel's business address is Weyerhaeuser Company,
Box 9777, Federal Way, WA 98063-9777.
Richard D. Simmons Director of Union Pacific since 1982. Retired President, International Herald
Tribune, communications, Washington, DC. Director, The Washington Post
Company, OBLOG Software Systems, Inc. Mr. Simmons was President of
International Herald Tribune through March 31, 1996. Age 66. Mr. Simmons'
business address is 105 N. Washington Street, Alexandria, VA 22314.
A-4
Present Principal Occupation or Employment
Name and Material Positions Held During the Past Five Years
---- ------------------------------------------------------
Ernesto Zedillo Ponce de Leon Director of Union Pacific since 2001. Former President of Mexico.
Dr. Zedillo served as President of Mexico through November 2000. Age 49.
Dr. Zedillo is a citizen of Mexico and his business address is Agua #110,
Col. Jardines del Pedregal, CP 01900 Mexico, D.F., Mexico.
A-5
Facsimile copies of the letter of election and transmittal, properly
completed and duly executed, will be accepted. The letter of election and
transmittal, share certificates and any other required documents should be sent
or delivered by each shareholder of Motor Cargo or such shareholder's broker,
dealer, commercial bank, trust company or other nominee to the exchange agent,
at the applicable address set forth below:
The Exchange Agent for the Offer is:
WELLS FARGO BANK MINNESOTA, N.A.
By Overnight, Hand or
By Mail: By Facsimile Transmission: Express Mail Delivery:
Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A.
Shareowner Services Shareowner Services Shareowner Services
Corporate Action Department Corporate Action Department Corporate Action Department
P.O. Box 64858 (800) 468-9716 (phone) 161 North Concord Exchange
St. Paul, Minnesota 55164-0858 (651) 450-4163 (fax) South St. Paul, Minnesota 55075
Any questions or requests for assistance or additional copies of this
prospectus, the letter of election and transmittal, the notice of guaranteed
delivery and the other exchange offer materials may be directed to the
information agent at its address and telephone number set forth below.
Shareholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the offer.
The Information Agent for the Offer is:
[LOGO] MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Call Collect: (212) 754-8000
Banks and Brokerage Firms Call: (800) 654-2468
Shareholders Please Call: (800) 607-0088
ANNEX B
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, AS AMENDED
MOTOR CARGO INDUSTRIES, INC.
845 WEST CENTER STREET
NORTH SALT LAKE, UTAH 84054
(801) 936-1111
October 31, 2001
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to inform you that on
October 15, 2001, Motor Cargo Industries, Inc. entered into an Agreement and
Plan of Merger with Union Pacific Corporation and Motor Merger Co., a
wholly-owned subsidiary of Union Pacific, which provides for the acquisition of
all of Motor Cargo's common stock. Under the terms of the merger agreement,
Union Pacific has commenced an exchange offer for all outstanding shares of
Motor Cargo common stock. In the exchange offer, Motor Cargo shareholders will
have the right to elect to receive for each Motor Cargo share, (i) 0.26 of a
share of Union Pacific common stock, (ii) $12.10 in cash, or (iii) a
combination of both. Subject to successful completion of the offer, and
satisfaction of certain conditions in the merger agreement, Motor Cargo will be
merged with Motor Merger Co.
If your shares are not exchanged in the offer, you will receive the $12.10
in cash, without interest, pursuant to the merger, the receipt of which may be
delayed due to the possibility of a delay in completing the merger after
completion of the offer. Shareholders who do not tender their shares of Motor
Cargo common stock in the offer will not have a right to receive Union Pacific
common stock in the merger.
The Board of Directors of Motor Cargo has approved and adopted the Agreement
and Plan of Merger, including the offer and the merger, and determined that the
terms of the offer and the merger are advisable and are fair to and in the best
interests of Motor Cargo shareholders. Accordingly, the Board of Directors of
Motor Cargo recommends that all Motor Cargo shareholders accept the offer and
tender their shares pursuant to the offer.
In arriving at its recommendation, the Board of Directors of Motor Cargo
gave careful consideration to a number of factors described in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9 that is being filed
today with the Securities and Exchange Commission, including the written
opinion of Morgan Keegan & Company, Inc. to Motor Cargo's Board of Directors
that the consideration of 0.26 of a share of Union Pacific common stock or
$12.10 in cash, to be received by shareholders for each share of Motor Cargo
common stock pursuant to the offer and the merger, is fair to shareholders from
a financial point of view. The Schedule 14D-9 contains important information
relating to the offer, and you are encouraged to read the Schedule 14D-9.
In addition to the enclosed Schedule 14D-9, also enclosed are Union
Pacific's exchange offer materials, dated October 31, 2001, including a
Preliminary Prospectus and a Letter of Election and Transmittal to be used for
tendering your shares in the offer and electing the consideration that you wish
to receive. These documents state the terms and conditions of the offer and
provide instructions on how to tender your shares and elect the type of
consideration you wish to receive. We urge you to read these documents
carefully.
The management and directors of Motor Cargo thank you for the support you
have given Motor Cargo over the years.
On behalf of the Board of Directors,
/s/ HAROLD R. TATE
Harold R. Tate
Chairman and Chief Executive Officer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
Motor Cargo Industries, Inc.
(Name of Subject Company)
Motor Cargo Industries, Inc.
(Name of Person(s) Filing Statement)
Common Stock, No Par Value
(Title of Class of Securities)
CUSIP NO. 619907 10 8
(CUSIP Number of Class of Securities)
-----------------
Marvin L. Friedland, Esq.
Vice President and General Counsel
Motor Cargo Industries, Inc.
845 West Center Street
North Salt Lake, UT 84054
(801) 936-1111
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person filing statement)
With a copy to:
Reed W. Topham, Esq.
Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, UT 84111
(801) 328-3131
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Item 1. Subject Company Information.
The name of the subject company is Motor Cargo Industries, Inc., a Utah
corporation ("Motor Cargo"). The address of the principal executive offices of
Motor Cargo is 845 West Center Street, North Salt Lake, Utah 84054, telephone
(801) 936-1111. The title of the class of equity securities to which this
Schedule 14D-9 relates is the common stock, no par value, of Motor Cargo. As of
October 26, 2001, there were 6,473,140 shares of Motor Cargo common stock
issued and outstanding.
Item 2. Identity and Background of Filing Person.
The name, business address and business telephone number of Motor Cargo,
which is the person filing this Schedule 14D-9, are set forth in Item 1 above.
This Schedule 14D-9 relates to the offer by Union Pacific Corporation, a
Utah corporation ("Union Pacific"), to exchange all outstanding shares of Motor
Cargo common stock for (i) 0.26 of a share of Union Pacific common stock, (ii)
$12.10 in cash or (iii) a combination of both, upon the terms and subject to
the conditions set forth in the Preliminary Prospectus, dated October 31, 2001,
and the related Letter of Election and Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer"). The Offer is
disclosed in a Tender Offer Statement on Schedule TO, dated October 31, 2001,
filed by Union Pacific with the Securities and Exchange Commission. As set
forth in the Schedule TO, the principal executive offices of Union Pacific are
located at 1416 Dodge Street, Omaha, Nebraska 68179, telephone (402) 271-5777.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 15, 2001 (the "Merger Agreement"), by and among Motor Cargo,
Union Pacific and Motor Merger Co., a Utah corporation and a wholly-owned
subsidiary of Union Pacific ("Merger Subsidiary"). The Merger Agreement
provides, among other things, that as soon as practicable after consummation of
the Offer and the satisfaction or waiver of certain conditions set forth in the
Merger Agreement, Motor Cargo will merge with Merger Subsidiary (the "Merger").
Unless certain specified conditions exist, Merger Subsidiary will be the
surviving corporation (the "Surviving Corporation").
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Certain contacts, transactions, negotiations and agreements between Motor
Cargo or its affiliates and certain of its directors and executive officers are
described in the Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended, and Rule 14f-1 thereunder (the
"Information Statement") that is attached as Annex I to this Schedule 14D-9 and
is incorporated herein by reference. Except as described in this Schedule 14D-9
or the Information Statement or as otherwise incorporated herein by reference,
to the knowledge of Motor Cargo, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest, between Motor Cargo or its affiliates and (1)
Motor Cargo's executive officers, directors or affiliates, or (2) Union Pacific
or Merger Subsidiary, or their respective officers, directors or affiliates.
The Merger Agreement
The summary of the Merger Agreement and the description of the conditions of
the Offer contained in "The Merger Agreement" and "The Offer--Conditions of Our
Offer," respectively, in the Preliminary Prospectus, which has been filed as an
exhibit to the Schedule TO and is being mailed to Motor Cargo's shareholders
together with this Schedule 14D-9, are incorporated herein by reference. Such
summary and description are qualified in their entirety by reference to the
Merger Agreement, which has been filed as Exhibit (e)(1) hereto and is
incorporated herein by reference.
The Shareholder Agreements
The summary of the Shareholder Agreements contained in "The Shareholder
Agreements" in the Preliminary Prospectus, which has been filed as an exhibit
to the Schedule TO and is being mailed to Motor Cargo's shareholders together
with this Schedule 14D-9, is incorporated herein by reference. Such summary is
B-2
qualified in its entirety by reference to the Shareholder Agreements, which
have been filed as Exhibits (e)(2) and (e)(3) hereto and are incorporated
herein by reference.
Confidentiality Agreement
Overnite Transportation Company, a wholly-owned subsidiary of Union Pacific
("Overnite"), entered into a customary confidentiality agreement with Morgan
Keegan & Company, Inc. ("Morgan Keegan"), as agent for Motor Cargo, on March 7,
2001 in order to receive information concerning Motor Cargo. A copy of the
Confidentiality Agreement has been filed as Exhibit (e)(4) hereto and is
incorporated herein by reference.
Stock Options
As a result of the approval of the Merger Agreement by the board of
directors of Motor Cargo (the "Board of Directors"), all stock options
outstanding under Motor Cargo's 1997 Stock Option Plan and 1999 Stock Option
Plan for Non-Employee Directors (collectively, the "Plans") became fully vested
and exercisable in accordance with the terms of the Plans. As permitted by the
Plans, the Board of Directors has determined that any unexercised options
outstanding on the date the Merger is consummated will terminate, and in
consideration of such termination, the holder of each option so terminated will
be entitled to receive, with respect to each share of Motor Cargo common stock
subject to such option, an amount in cash (net of applicable withholdings)
equal to the excess of $12.10 over the per share exercise price of such option.
Salary Continuation Agreements
Motor Cargo has salary continuation agreements with four of its key
management employees. Under the agreements, Motor Cargo is obligated to provide
for each such employee or his beneficiaries, during a period of not more than
ten years after the employee's death, disability or retirement, annual benefits
ranging from $17,000 to $23,000. Pursuant to the Merger Agreement, Union
Pacific has agreed to cause the Surviving Corporation and its subsidiaries to
honor and assume the salary continuation agreements.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Board of Directors.
The Board of Directors, by unanimous vote, has approved and adopted the
Merger Agreement and the transactions contemplated by it, including the Offer
and the Merger, and has determined that the Offer and the Merger are advisable
and fair to and in the best interests of the shareholders of Motor Cargo and
recommends that shareholders of Motor Cargo accept the Offer and tender their
shares of Motor Cargo common stock pursuant to the Offer. In reaching their
decision as to whether to tender for cash or shares of Union Pacific common
stock, shareholders should consider their personal financial situation and
consult their own financial, accounting and tax advisors. The Board of
Directors also urges shareholders to obtain current quotations for Union
Pacific common stock and Motor Cargo common stock. In that regard, you should
be aware that on October 29, 2001, the closing market value of 0.26 of a share
of Union Pacific common stock was approximately $13.06, which is higher than
the per share cash alternative of $12.10 offered pursuant to the Offer. If your
shares are not exchanged in the Offer, you will receive the $12.10 in cash,
without interest, pursuant to the Merger, the receipt of which may be delayed
due to the possibility of a delay in completing the Merger after completion of
the Offer. Shareholders who do not tender their shares of Motor Cargo common
stock in the Offer will not have a right to receive Union Pacific common stock
in the Merger.
(b) Background; Reasons for the Recommendation; Opinion of Morgan Keegan.
Background
In response to recent consolidations in the trucking industry, Motor Cargo
considered available options to bolster its competitive position, including the
possibility of entering into a business combination. On January 16, 2001, Motor
Cargo engaged Morgan Keegan to serve as its financial advisor. Representatives
of Motor Cargo had preliminary discussions with two potential acquirors but
concluded that neither company was prepared to make an offer to acquire Motor
Cargo on acceptable terms.
B-3
In February 2001, Marshall L. Tate, who was at that time the Chief Executive
Officer of Motor Cargo, was contacted by John Terry, a shareholder of Motor
Cargo and a consultant to Overnite. Mr. Terry and Mr. Marshall Tate discussed
whether Motor Cargo would be interested in discussing a potential acquisition
transaction with Overnite. Subsequently, on March 1, 2001, Mr. Marshall Tate
and Harold R. Tate, Motor Cargo's Chairman, each received a telephone call from
Leo H. Suggs, Chairman and Chief Executive Officer of Overnite, confirming
Overnite's interest in a potential transaction. Thereafter, Overnite contacted
Morgan Keegan to discuss the terms of a confidentiality agreement and arrange a
meeting between Mr. Harold Tate and Mr. Suggs.
On March 7, 2001, Overnite entered into a confidentiality agreement with
Morgan Keegan, on behalf of Motor Cargo. Pursuant to the terms of the
confidentiality agreement, Motor Cargo furnished Overnite with information in
connection with its evaluation of a possible transaction with Motor Cargo.
On March 16, 2001, following Overnite's review of the information provided
by Motor Cargo, Mr. Suggs, Patrick D. Hanley, Senior Vice President and Chief
Financial Officer of Overnite, and Mr. Terry met with Mr. Harold Tate and
Morgan Keegan in Phoenix, Arizona for preliminary discussions regarding whether
a transaction could be completed on terms acceptable to both parties.
As a result of the meeting, Motor Cargo agreed to allow Overnite to proceed
with its due diligence investigation of Motor Cargo by teleconference and by
conducting investigations in Salt Lake City, Utah. During the remainder of
March, Overnite conducted its due diligence activities and, on March 31, 2001,
Richard K. Davidson, Chairman, President and Chief Executive Officer of Union
Pacific, authorized Mr. Suggs to pursue a possible business combination
transaction with Motor Cargo.
On April 2, 2001, Mr. Suggs, Mr. Hanley and Mr. Terry met with Mr. Harold
Tate and Morgan Keegan at the offices of Motor Cargo in North Salt Lake, Utah
and indicated that Overnite was potentially interested in acquiring all of the
outstanding common stock of Motor Cargo at a value of $10.25 per share. After
further discussions, the parties determined that further negotiations would not
be likely to produce definitive terms for an acquisition that would be
acceptable to both parties.
In a letter to Overnite, dated April 5, 2001, Motor Cargo's legal counsel
requested that all confidential information be returned to Morgan Keegan or
destroyed in accordance with the terms of the confidentiality agreement. In a
letter dated April 6, 2001, Mr. Suggs confirmed the termination of Overnite's
interest in a business combination transaction with Motor Cargo.
On April 9, 2001, the Board of Directors met and concluded that the terms of
the proposed transaction were inadequate.
Between the latter part of April 2001 and September 2001, Mr. Suggs and Mr.
Harold Tate occasionally discussed the operations of their respective
companies, and Overnite continued to follow the financial performance of Motor
Cargo. In addition, Morgan Keegan was frequently in contact with
representatives of Overnite regarding a possible acquisition by Union Pacific
of Motor Cargo.
During the latter part of August and September 2001, Mr. Suggs and Mr.
Harold Tate arranged a meeting between Mr. Harold Tate and Mr. Davidson in
North Salt Lake, Utah for purposes of determining whether negotiation of an
acquisition could resume. On September 6, 2001, Mr. Suggs and Mr. Davidson
visited Motor Cargo's facilities in North Salt Lake, Utah and discussed with
Mr. Harold Tate a possible acquisition of Motor Cargo by Union Pacific,
although no negotiations took place.
On September 26, 2001, Mr. Suggs visited Motor Cargo's headquarters and made
a new proposal for the possible acquisition of Motor Cargo by Union Pacific.
Motor Cargo's management reviewed the proposal with Morgan Keegan and Motor
Cargo's legal counsel and proposed a modification to the proposal later that
day. The proposed modification increased the minimum exchange ratio applicable
to the exchange of Motor Cargo shares for shares of Union Pacific common stock.
On September 28, 2001, Mr. Suggs confirmed that Union Pacific was interested in
pursuing a possible acquisition as modified by Motor Cargo.
B-4
During the next two weeks, legal counsel for both parties negotiated the
terms and conditions of the Merger Agreement. Union Pacific and Mr. Harold Tate
and Mr. Marvin L. Friedland, Vice President and General Counsel of Motor Cargo,
also negotiated the terms and conditions of the Shareholder Agreements relating
to the exchange of shares by Mr. Harold Tate and Mr. Friedland, the execution
of which was a condition to Union Pacific's proceeding with the transaction
with Motor Cargo. During this two week period, representatives of Overnite and
Union Pacific conducted further due diligence by teleconference and by
investigations in Salt Lake City, Utah.
On October 15, 2001, the Board of Directors held a special meeting. At the
meeting, Motor Cargo's management and legal and financial advisors reviewed the
terms of the Merger Agreement and the Shareholder Agreements with the members
of the Board of Directors. Morgan Keegan made a presentation to the Board of
Directors, including a discussion of analyses used in evaluating the proposed
transaction. During the meeting, Morgan Keegan provided its opinion that the
consideration to be received by shareholders of Motor Cargo pursuant to the
Offer and the Merger is fair to those shareholders from a financial point of
view, which opinion was subsequently confirmed by Morgan Keegan in writing.
After full consideration and discussion, the Board of Directors unanimously
approved and adopted the Merger Agreement, including the Offer and the Merger.
Following the Board of Directors meeting, the appropriate parties signed the
Merger Agreement and the Shareholder Agreements, and the parties issued a joint
press release announcing the transaction.
On October 31, 2001, Union Pacific and Motor Cargo issued a joint press
release announcing the commencement of the Offer.
Reasons for the Recommendation
In making the determination and recommendation described above, the Board of
Directors considered a number of factors, including those described below:
. current industry, economic and market conditions, including recent
business combination transactions by other carriers;
. the Board of Directors' familiarity with the business, financial
condition, prospects and current business strategy of Motor Cargo; in this
regard, the Board of Directors particularly considered:
. the historical results, financial condition, results of operations, cash
flows, earnings and assets of Motor Cargo;
. Motor Cargo's future prospects; and
. the current near-term and long-term outlook for the less-than-truckload
("LTL") market;
. the strategic fit between Motor Cargo and Union Pacific's existing
trucking operations;
. Motor Cargo's business, strategic objectives and prospects if it did not
pursue the transaction, and the risks and uncertainties associated
therewith, including risks associated with increased competition with
larger companies;
. the fact that Motor Cargo shareholders would be able to elect to receive
either $12.10 in cash or, alternatively, 0.26 of a share of Union Pacific
common stock (or a combination thereof) for each share of Motor Cargo
common stock;
. the fact that both the cash consideration of $12.10 and the value of Union
Pacific common stock based upon an exchange ratio of 0.26 of a share
represented a substantial premium over the average trading price of Motor
Cargo common stock over the past year;
. the fact that Union Pacific common stock is highly liquid, has a current
quarterly dividend of $0.20 per share and would provide shareholders
electing to receive Union Pacific common stock with an opportunity to
participate in the growth potential of Union Pacific;
B-5
. the Board of Directors' review of public disclosures about the business,
financial condition, prospects and current business strategy of Union
Pacific, the due diligence review by Motor Cargo's management and
financial and legal advisors of Union Pacific and Union Pacific's recent
historical stock price performance;
. Morgan Keegan's analyses presented to the Board of Directors and Morgan
Keegan's opinion that, based upon the assumptions, limitations and
qualifications in the opinion, the consideration to be received by
shareholders of Motor Cargo pursuant to the Offer and the Merger is fair
to shareholders from a financial point of view;
. the expected ability to consummate the Offer and the Merger as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, which
would allow shareholders electing to receive shares of Union Pacific
common stock for their shares of Motor Cargo common stock to defer income
tax liability until such shares of Union Pacific common stock are sold;
. the fact that the Offer and the Merger provide for a prompt exchange offer
for all shares of Motor Cargo common stock to be followed by a second-step
merger at the same cash consideration per share, thereby enabling Motor
Cargo's shareholders to obtain the benefits of the transaction at the
earliest possible time;
. the fact that preliminary contacts with other potential buyers did not
yield an offer superior to the terms of the Merger Agreement;
. the belief, based in part upon the analyses of Morgan Keegan and the
opinion of senior management, that it was unlikely that a third party
would propose a transaction superior to the Union Pacific transaction;
. the terms of the Merger Agreement, which, subject to certain conditions,
allow Motor Cargo to terminate the Merger Agreement upon payment of a $5
million termination fee if a superior proposal to acquire Motor Cargo is
made;
. the significant likelihood that the transactions contemplated by the
Merger Agreement and the Offer will be consummated, particularly in light
of Union Pacific's reputation, ability to finance the transaction, lack of
any financing condition in the Merger Agreement, the ability to terminate
the Offer and the Merger Agreement only in limited circumstances and the
likely satisfaction of the conditions to the Offer, including the
condition that holders tender two-thirds of the outstanding shares of
Motor Cargo common stock and the regulatory approval requirements; and
. the fact that Harold R. Tate, Motor Cargo's majority shareholder, was in
favor of the transaction and willing to enter into a Shareholder Agreement
providing for the exchange of all of his shares of Motor Cargo common
stock for shares of Union Pacific common stock.
In view of the wide variety of factors considered by the Board of Directors
in connection with its evaluation of the Offer and the complexity of such
matters, the Board of Directors did not consider it practical to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. In addition, the Board of
Directors did not undertake to determine specifically whether any particular
factor (or any aspect of any particular factor) was favorable or unfavorable to
its ultimate determination, but rather conducted a discussion of the factors
described above, including asking questions of Motor Cargo's management and
legal and financial advisors, and reached a general consensus that the Offer is
fair to and advisable and in the best interests of Motor Cargo and its
shareholders. In considering the factors described above, individual members of
the Board of Directors may have given different weight to different factors.
Opinion of Morgan Keegan
Motor Cargo retained Morgan Keegan pursuant to an engagement letter
agreement, dated January 16, 2001 (the "Engagement Letter"), to act as its
exclusive financial advisor with respect to a possible business combination
involving Motor Cargo. Morgan Keegan is a nationally recognized investment
banking firm and was selected by Motor Cargo based on its reputation and
experience in investment banking in general and its recognized expertise in the
valuation of businesses as well as its prior investment banking relationships
with Motor Cargo.
B-6
On October 15, 2001, at the special meeting of the Board of Directors,
Morgan Keegan delivered to the Board of Directors its oral opinion (which was
subsequently confirmed in a written opinion, dated October 15, 2001) that, as
of such date and based on and subject to the matters set forth therein, the
consideration to be received pursuant to the Offer and the Merger is fair, from
a financial point of view, to the shareholders of Motor Cargo. Morgan Keegan
has consented to the disclosure relating to its opinion in this Schedule 14D-9
and to the inclusion of its opinion as Annex II to this Schedule 14D-9.
You should consider the following when reading the discussion of the opinion
of Morgan Keegan herein:
. we urge you to read carefully the entire opinion of Morgan Keegan, which
is attached as Annex II to this Schedule 14D-9 and is incorporated herein
by reference;
. Morgan Keegan's advisory services and opinion were provided to the Board
of Directors for its information in its consideration of the Offer and the
Merger and was directed only to the fairness, from a financial point of
view, of the consideration to be received in the Offer and the Merger by
the shareholders of Motor Cargo; and
. Morgan Keegan's opinion does not constitute a recommendation as to whether
or not any shareholder should tender shares of Motor Cargo common stock in
connection with the Offer or as to how any shareholder should vote with
respect to the Merger.
Although Morgan Keegan evaluated the fairness, from a financial point of
view, of the consideration to be received by the shareholders of Motor Cargo
pursuant to the Offer and the Merger, the consideration itself was determined
by Motor Cargo and Union Pacific through arm's-length negotiations. Motor Cargo
did not provide specific instructions to, or place any limitations on, Morgan
Keegan with respect to the procedures to be followed or factors to be
considered by Morgan Keegan in performing its analyses or providing its opinion.
In connection with its opinion, Morgan Keegan reviewed, among other things,
the following:
. the draft Merger Agreement and the terms of the Offer and the Merger and
drafts of certain related documents;
. certain publicly available business and financial information relating to
Motor Cargo and Union Pacific; and
. certain other information provided to it by Motor Cargo and Union Pacific.
Morgan Keegan also held discussions with members of the senior management of
Motor Cargo and Union Pacific regarding the strategic rationale for, and the
potential benefits of, the transactions contemplated by the Merger Agreement
and the past and current business operations, financial condition and future
prospects of their respective companies. In addition, Morgan Keegan:
. reviewed the reported historical prices and historical trading activity
for Motor Cargo common stock and Union Pacific common stock for the period
from October 16, 2000 to October 15, 2001;
. compared the financial performance of Motor Cargo and Union Pacific and
the prices and trading activity of Motor Cargo common stock and Union
Pacific common stock with that of certain other publicly-traded companies
and their securities;
. reviewed the financial terms, to the extent publicly available, of certain
other business combinations and other transactions that it deemed relevant;
. reviewed the potential pro forma impact of the Offer and the Merger on the
estimated earnings per share for the year ended December 31, 2002 of Union
Pacific under certain scenarios; and
. performed such other analyses and considered such other factors as it
deemed appropriate.
B-7
Morgan Keegan assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion and did not assume any obligation independently to verify such
information. Morgan Keegan assumed that the internal financial statements and
other financial and operating data had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Motor Cargo. Morgan Keegan also assumed that there had been no
material changes in Motor Cargo's or Union Pacific's assets, financial
condition, results of operations, business or prospects since the respective
dates of the last financial statements made available to it. Morgan Keegan did
not make any independent valuation, inspection or appraisal of the assets or
liabilities of Motor Cargo or Union Pacific, nor was it furnished with any such
appraisals or valuations. In addition, Morgan Keegan was informed that it is
the intention of the parties that the Offer and the Merger qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and assumed that the Offer and the Merger would be
consummated in accordance with the terms set forth in the draft Merger
Agreement and in compliance with the applicable provisions of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
all other applicable federal, state and local statutes, rules, regulations and
ordinances. Morgan Keegan's opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion. In addition, Morgan Keegan did
not express any opinion as to the actual value of the Union Pacific common
stock or the prices at which the Union Pacific common stock would trade
following the date of its opinion.
Morgan Keegan, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Morgan Keegan is
familiar with Motor Cargo, having provided certain investment banking services
to Motor Cargo from time to time, including having acted as its financial
adviser in connection with, and having participated in certain of the
negotiations leading to, the Merger Agreement.
Morgan Keegan provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Motor Cargo or Union Pacific for its own account or for the accounts of
customers. Morgan Keegan may provide investment banking services to Union
Pacific and its subsidiaries in the future.
The following is a summary of the material financial analyses used by Morgan
Keegan in reaching its opinion and does not purport to be a complete
description of the analyses performed by Morgan Keegan. The following
quantitative information, to the extent it is based on market data, is based on
market data as it existed at or about October 15, 2001 and is not necessarily
indicative of current market conditions. Readers should understand that the
order of analyses and the results derived from these analyses described below
do not represent relative importance or weight given to these analyses by
Morgan Keegan. The summary of the financial analyses includes information
presented in tabular format. In order to understand fully the financial
analyses used by Morgan Keegan, these tables must be read together with the
text of each summary. The tables alone do not describe completely the financial
analyses.
Historical Stock Price and Exchange Ratio Performance Analysis
Morgan Keegan examined the historical closing prices of Motor Cargo common
stock and Union Pacific common stock from October 16, 2000 to October 15, 2001.
During this time period, Motor Cargo common stock reached a high of $10.06 per
share and a low of $5.13 per share. For the same time period, Union Pacific
common stock reached a high of $60.60 per share and a low of $39.38 per share.
Morgan Keegan compared the historical ratios of the average closing price of
Union Pacific common stock to the average closing price of Motor Cargo common
stock for various periods ended October 15, 2001. Morgan Keegan also examined
the premium or discount represented by the transaction exchange ratio over the
average exchange ratio for various time periods. The following table sets forth
the results:
B-8
Average Market Transaction Exchange Ratio/
Period Ended 10/15/01 Exchange Ratio Avg. Market Exchange Ratio
--------------------- -------------- ---------------------------
1 trading day (Oct. 15, 2001) 0.2072 25.5%
Last 10 trading days......... 0.2073 25.4%
Last 30 trading days......... 0.1808 43.8%
Last 180 trading days........ 0.1596 62.9%
Since Oct. 16, 2000.......... 0.1530 70.0%
The transaction exchange ratio is higher than the average exchange ratio of the
closing prices for all time periods analyzed.
Peer Group Analysis
Morgan Keegan compared financial, market and operating information of Motor
Cargo and Union Pacific with corresponding data for two groups:
. a group of LTL carriers, consisting of Arkansas Best Corporation, Arnold
Industries, Consolidated Freightways, Old Dominion Freight Line, Roadway
Corporation, USFreightways and Yellow Corporation; and
. a group of Class I railroad companies, consisting of Burlington Northern
Santa Fe, CSX Corporation and Norfolk Southern.
Specifically, Morgan Keegan:
. calculated the enterprise value of each company as a multiple of its
respective: LTM sales, LTM EBITDA and LTM EBIT;
. calculated the market capitalization of each company as a multiple of its
respective: LTM net income from continued operations and its latest
publicly-available book value;
. applied the median valuation multiples from their respective peer group to
Motor Cargo's and Union Pacific's results for the latest twelve months
ended June 30, 2001 or book value as of June 30, 2001 to derive an implied
range of equity values and price per share for Motor Cargo and Union
Pacific; and
. used the implied price per share information to calculate an implied range
of exchange ratios.
The enterprise value of a company is equal to the value of its fully-diluted
common equity plus debt and the liquidation value of its preferred stock, if
any, minus cash and the value of certain other assets including minority
interests in other entities. LTM means the last twelve-month period for which
financial data for the company at issue has been reported. EBITDA means
earnings before interest, taxes, depreciation and amortization. EBIT means
earnings before interest and taxes.
The results of that analysis are set forth in the following table:
Motor Cargo
Peer Group Implied Price
Median Multiples per Share
---------------- -------------
Sales.................................. 0.4x $ 8.66
EBITDA................................. 3.8x 11.31
EBIT................................... 7.3x 11.78
Book Value............................. 1.3x 11.93
Net Income............................. 11.8x 12.15
Union Pacific
Peer Group Implied Price
Median Multiples per Share
---------------- -------------
Sales.................................. 1.9x $51.44
EBITDA................................. 9.0x 68.76
EBIT................................... 15.3x 73.43
Book Value............................. 1.2x 43.32
Net Income............................. 23.1x 77.52
B-9
Based on peer group analysis, Morgan Keegan derived an implied share price
range of $8.66 to $12.15 for Motor Cargo and $43.52 to $77.52 for Union Pacific
and an implied exchange ratio range of 0.1568 to 0.2000.
Discounted Cash Flow Analysis
Morgan Keegan performed a discounted cash flow analysis on the projected
cash flows of Motor Cargo for the fiscal year ending December 31, 2002 through
December 31, 2006 using projections and assumptions provided by the management
of Motor Cargo. Morgan Keegan used a range of discount rates (10.17% to 11.17%)
and terminal multiples (3.0x to 4.0x) based on estimated EBITDA for the fiscal
year ending December 31, 2006 to calculate a range of implied equity values and
price per share for Motor Cargo common stock. The implied share prices were
compared to Union Pacific's closing share price on October 15, 2001 of $48.02
to calculate a range of implied exchange ratios.
Based on discounted cash flow analysis, Morgan Keegan derived an implied
Motor Cargo share price range of $10.47 to $13.53 and an implied exchange ratio
range 0.2266 to 0.2928.
Pro Forma Impact Analysis
Morgan Keegan analyzed certain pro forma effects of the Merger, including
the impact of the Merger on First Call's estimate of Union Pacific's earnings
per share for the year ended December 31, 2002 using different assumptions for
the composition of the stock/cash consideration. Morgan Keegan determined that
the transaction would be slightly dilutive to Union Pacific's stand-alone
consensus 2002 earnings per share estimates as reported by First Call, assuming
that 100% of the consideration is Union Pacific common stock. However, the
transaction would be slightly accretive to Union Pacific's estimated 2002
earnings per share if approximately 5% or more of the consideration is cash.
Morgan Keegan did not incorporate any synergies or cost savings into this
analysis and noted that since Union Pacific's estimated net income is
significantly larger than Motor Cargo's, the change in the accretive or
dilutive effect of the various scenarios is minimal. The pro forma impact
analysis assumed: acquisition debt is financed at 7.0%; effective tax rate of
37.5%; goodwill will not be amortized and will be accounted for in accordance
with Statement of Financial Accounting Standards No. 142; and transaction fees
of $2.0 million amortized over five years.
Premium Analysis
Morgan Keegan analyzed the premiums paid for selected completed
non-financial institution and non-technology mergers and acquisitions of
publicly-traded companies with equity values between $25 million and $100
million since January 1, 2000. Morgan Keegan analyzed the premiums paid for all
trucking (truckload and less-than-truckload) mergers and acquisitions of
publicly-traded companies since October 1, 1997. Morgan Keegan analyzed the
premiums paid over the analyzed target company's stock price one day, one week
and one month prior to the announcement date of their respective transactions,
calculated the median of these premiums and applied these premiums to Motor
Cargo's closing stock price on October 15, 2001, October 9, 2001 and August 28,
2001 to calculate an implied share price for Motor Cargo common stock. The
implied share price for Motor Cargo common stock was divided by Union Pacific's
closing price on October 15, 2001 to calculate an implied exchange ratio.
The median premiums over the one-day, five-day and thirty-day closing prices
for the non-financial institution and non-technology transactions were 25.5%,
30.3% and 45.8%, respectively. The median premiums over the one-day, five-day
and thirty-day closing prices for the trucking transactions were 24.2%, 23.1%
and 30.3%, respectively. Cash consideration of $12.10 per share of Motor Cargo
common stock represents a premium of 21.6%, 28.0% and 37.5% to its closing
price share on October 15, 2001, October 9, 2001 and August 28, 2001,
respectively.
Based on the average premium paid for non-financial and non-technology
transactions since January 1, 2000, the implied Motor Cargo share price range
is $12.32 to $12.83 and the implied exchange ratio is 0.2565 to 0.2672. Based
on the average premium paid in all trucking transactions since October 1, 1997,
the implied Motor Cargo share price range is $11.47 to $12.36 and the implied
exchange ratio is 0.2388 to 0.2574.
B-10
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analysis as a whole, could create an incomplete
view of the processes underlying Morgan Keegan's opinion. In arriving at its
fairness determination, Morgan Keegan considered the results of all such
analyses and did not attribute any particular weight to any factor or analysis
considered by it; rather, Morgan Keegan made its determination as to fairness
on the basis of its experience and professional judgment after considering the
results of all such analyses. No company or transaction used in the above
analyses is directly comparable to Motor Cargo or the contemplated
transactions. In addition, mathematical analysis such as determining the mean
or median is not in itself a meaningful method of using selected data. The
analyses were prepared solely for purposes of Morgan Keegan providing its
opinion to the Board of Directors as to the fairness, from a financial point of
view, of the consideration to be received by the shareholders of Motor Cargo
pursuant to the Offer and the Merger and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. Analyses based on forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their respective advisors, none of Motor Cargo,
Morgan Keegan or any other person assumes responsibility if future results are
materially different from those forecast. As described below, the opinion of
Morgan Keegan to the Board of Directors was among many factors taken into
consideration by the Board of Directors in making its determination to approve
the Merger Agreement.
(c) Intent to Tender.
To Motor Cargo's knowledge, after reasonable inquiry, all of its executive
officers, directors, and affiliates currently intend to tender all shares of
Motor Cargo common stock that are held of record or are beneficially owned by
them pursuant to the Offer, other than the shares of Motor Cargo common stock,
if any, held by such persons that, if tendered, could cause them to incur
liability under Section 16(b) of the Securities Exchange Act of 1934. Prior to
the completion of the Offer, executive officers and directors have indicated
they may exercise options to purchase in the aggregate up to 229,000 shares of
Motor Cargo common stock and sell the underlying shares in brokerage
transactions. Harold R. Tate, Chairman of the Board and Chief Executive Officer
of Motor Cargo, and Marvin L. Friedland, Vice President and General Counsel of
Motor Cargo, have entered into Shareholder Agreements with Union Pacific,
pursuant to which they have agreed to tender all of their shares of Motor Cargo
common stock in the Offer. Mr. Tate and, subject to certain exceptions, Mr.
Friedland have agreed to elect to receive only Union Pacific common stock for
their shares of Motor Cargo common stock.
Item 5. Persons/Assets Retained, Employed, Compensated or Used.
Pursuant to the Engagement Letter, Motor Cargo retained Morgan Keegan to act
as its exclusive financial advisor with respect to a possible business
combination involving Motor Cargo. Morgan Keegan was retained to (1) provide
advisory services, including general business and financial analysis of Motor
Cargo, (2) identify opportunities for the sale of Motor Cargo including the
approach of two specific potential acquirors, (3) advise Motor Cargo concerning
opportunities for such sale, whether or not identified by Morgan Keegan, (4) if
requested by Motor Cargo, participate on Motor Cargo's behalf in negotiations
concerning such sale and (5) if requested by Motor Cargo, deliver an opinion to
the Board of Directors with respect to the fairness of any such transaction to
the shareholders of Motor Cargo, from a financial point of view.
As compensation for the services provided by Morgan Keegan, Motor Cargo
agreed to pay Morgan Keegan (1) an opinion fee of $250,000 upon delivery by
Morgan Keegan of a fairness opinion with respect to a sale of Motor Cargo, and
(2) a transaction fee of 1.25% of the gross value of all cash, securities and
other property paid directly or indirectly by an acquiror to the shareholders
of Motor Cargo, including the value of any indebtedness assumed by the
acquiring party. Motor Cargo also agreed to reimburse Morgan Keegan for its
reasonable out-of-pocket expenses incurred in connection with its engagement
and to indemnify Morgan Keegan against certain
B-11
liabilities in connection with its engagement. In the past, Morgan Keegan and
its affiliates have provided certain financial and investment banking services
to Motor Cargo and have received compensation for such services.
Morgan Keegan has informed Motor Cargo that, in the ordinary course of its
trading and brokerage activities, they or their affiliates may at any time hold
long or short positions and may trade or otherwise effect transactions, for
their own accounts and the accounts of customers, in debt or equity securities
of Motor Cargo or Union Pacific.
Except as set forth above, neither Motor Cargo nor any person acting on its
behalf has or currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to shareholders of Motor Cargo
on Motor Cargo's behalf with respect to the Offer.
Item 6. Interest in Securities of the Subject Company.
To the knowledge of Motor Cargo, except as otherwise set forth in this
Schedule 14D-9, no transactions in Motor Cargo common stock have been effected
during the past 60 days by Motor Cargo or by any affiliate or subsidiary of
Motor Cargo or any of their officers or directors.
Item 7. Purposes of the Transaction and Plans or Proposals.
Motor Cargo is not currently undertaking or engaged in any negotiations in
response to the Offer that relate to (1) a tender offer for or other
acquisition of Motor Cargo's securities by Motor Cargo, any subsidiary of Motor
Cargo or any other person; (2) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving Motor Cargo or any subsidiary of Motor
Cargo; (3) a purchase, sale or transfer of a material amount of assets of Motor
Cargo or any subsidiary of Motor Cargo; or (4) any material change in the
present dividend rate or policy, or indebtedness or capitalization of Motor
Cargo.
There are no transactions, resolutions of the Board of Directors, agreements
in principle or signed contracts in response to the Offer that relate to one or
more of the events referred to in the preceding paragraph.
Item 8. Additional Information.
Information Statement Pursuant to Rule 14f-1.
The Information Statement attached as Annex I to this Schedule is being
furnished in connection with the possible designation by Union Pacific, under
the terms of the Merger Agreement, of certain persons to be elected to the
Board of Directors other than at a meeting of Motor Cargo's shareholders.
Merger Statute
Under the Utah Revised Business Corporation Act, if Union Pacific acquires,
pursuant to the Offer or otherwise, at least 90% of the outstanding shares of
Motor Cargo common stock and contributes the acquired shares to Merger
Subsidiary, Merger Subsidiary may effect the Merger without the approval of
Motor Cargo's shareholders. If Merger Subsidiary does not acquire at least 90%
of the outstanding shares of Motor Cargo common stock, however, the approval of
Motor Cargo's shareholders will be required to effect the Merger.
Utah Control Shares Acquisition Act
The Utah Control Shares Acquisition Act provides that "control shares" of a
corporation acquired in a control share acquisition have no voting rights
except as granted by the shareholders of the corporation. "Control shares" are
shares that, when added to shares then owned or controlled by a shareholder,
increase the shareholder's control of voting power above one of three
thresholds: more than one-fifth, more than one-third, or more than one-half of
the outstanding voting power of the corporation. Under Utah law, a corporation
may
provide in its articles of incorporation or bylaws that the Control Shares
Acquisition Act does not apply to the corporation. Motor Cargo's bylaws, as
amended, provide that the Control Shares Acquisition Act does not apply to
acquisitions of Motor Cargo's capital stock.
B-12
Dissenters' Rights
In connection with the Offer, Motor Cargo shareholders do not have
dissenters' rights. Motor Cargo shareholders who choose not to tender their
shares in the Offer may exercise dissenters' rights in connection with the
Merger in accordance with the Utah Revised Business Corporation Act. The Utah
Revised Business Corporation Act provides that a shareholder, whether or not
entitled to vote, is entitled to dissent from a plan of merger and obtain
payment of the fair value of shares held by the shareholder. If a dissenting
shareholder and Motor Cargo do not agree on the fair value of the shareholder's
shares, the shareholder will have the right to judicial determination of the
fair value of the shares. The value so determined could be more or less than
the price per share to be paid under the Offer and the Merger. To assert
dissenters' rights, a shareholder must demand payment pursuant to Part 13 of
the Utah Revised Business Corporation Act. Failure to follow the steps required
by Part 13 may result in the loss of dissenters' rights.
United States Antitrust Compliance
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and to the FTC and certain
waiting period requirements have been satisfied. The purchase of the shares of
Motor Cargo common stock pursuant to the Offer is subject to these requirements.
Pursuant to the requirements of the HSR Act, Union Pacific and Motor Cargo
each filed a Notification and Report Form with respect to the Offer with the
Antitrust Division and the FTC on October 26, 2001. The Offer cannot be
completed until a waiting period of 30 days has expired or been terminated
early by the federal agencies. The waiting period commences on the date that
both Motor Cargo and Union Pacific have substantially complied with the filing
requirements. The FTC or the Antitrust Division can also request additional
information and materials from Union Pacific and from Motor Cargo in connection
with their review of the Offer. Should there be a request for additional
information, Union Pacific and Motor Cargo cannot complete the Offer until 30
days after the parties have substantially complied with the request for
additional information, unless the 30-day waiting period is terminated early.
If either federal agency believes that the Offer would violate the federal
antitrust laws by substantially lessening competition in any line of commerce
affecting United States consumers, it has the authority to seek to enjoin the
transactions. Expiration or termination of the HSR Act waiting period is a
condition to the Offer.
Private parties (including individual states) may also bring legal actions
under the antitrust laws. We do not believe that the consummation of the Offer
will result in a violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made, or if such a challenge is made, what the result will be.
If the Antitrust Division, the FTC, a state or a private party raises
antitrust concerns in connection with the proposed transaction, Union Pacific
and Motor Cargo may engage in negotiations with the relevant governmental
agency or party concerning possible means of addressing these issues and may
delay consummation of the Offer or the Merger while those discussions are
ongoing. Union Pacific and Motor Cargo have agreed to use their respective
reasonable best efforts to resolve any antitrust issues.
On November 13, 2001, Motor Cargo issued a press release announcing that the
Department of Justice and the Federal Trade Commission had granted early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, in connection with the Offer. A copy of
the press release was filed as Exhibit (a)(6) hereto and incorporated herein by
reference.
Consummation of the Offer
On November 30, 2001, Union Pacific and Motor Cargo jointly issued a press
release filed as Exhibit (a)(8) hereto and incorporated herein by reference
announcing the expiration of the Offer. The Offer expired at midnight, New York
City time, on Thursday, November 29, 2001. All shares of Motor Cargo common
stock
B-13
validly tendered (and not properly withdrawn) prior to the expiration of the
Offer have been accepted for exchange and will be exchanged promptly for either
Union Pacific common stock or cash, as per the election of each tendering Motor
Cargo shareholder. Approximately 6,708,800 shares of Motor Cargo common stock
were validly tendered and not properly withdrawn prior to the expiration of the
Offer, which constitutes approximately 98.3% of the total number of outstanding
shares of Motor Cargo common stock. In addition, the preliminary count by the
exchange agent indicated that an additional 163,100 Motor Cargo shares were
tendered pursuant to notices of guaranteed delivery.
Pursuant to the Merger Agreement, upon acceptance by Union Pacific of the
Motor Cargo shares, Union Pacific was entitled to appoint a majority of the
members of the board of directors of Motor Cargo. Union Pacific has appointed
James R. Young, Carl W. von Bernuth, Mary S. Jones, Joseph E. O'Conner and
James J. Theisen, Jr. to serve as members of the board of Motor Cargo. Except
for Marvin L. Friedland and Louis V. Holdener, who have continued as members of
the Motor Cargo board, all former members of the board of directors of Motor
Cargo have resigned.
B-14
Item 9. Exhibits.
Exhibit No. Description
----------- -----------
(a)(1) Preliminary Prospectus dated October 31, 2001 (incorporated by reference to Exhibit (a)(1) to the
Schedule TO of Union Pacific filed on October 31, 2001).
(a)(2) Letter of Election and Transmittal (incorporated by reference to Exhibit (a)(2) to the Schedule TO
of Union Pacific filed on October 31, 2001).
(a)(3) Letter to holders of Motor Cargo common stock, dated October 31, 2001.*
(a)(4) Joint Press Release issued by Union Pacific and Motor Cargo on October 15, 2001 (incorporated
by reference to Exhibit 99.1 to Motor Cargo's Current Report on Form 8-K filed on October 16,
2001).
(a)(5) Opinion of Morgan Keegan & Company, Inc., dated October 15, 2001 (included in Annex II
hereto).*
(a)(6) Press Release issued by Motor Cargo on November 13, 2001 (previously filed with Amendment No. 1
to Motor Cargo's Schedule 14D-9).
(a)(7) Prospectus, dated November 29, 2001, filed by Union Pacific on November 29, 2001 pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as amended (incorporated by reference).
(a)(8) Joint Press Release issued by Union Pacific and Motor Cargo on November 30, 2001 (previously
filed with Amendment No. 3 to Motor Cargo's Schedule 14D-9).
(e)(1) Agreement and Plan of Merger, dated as of October 15, 2001, by and among Motor Cargo, Union
Pacific and Merger Subsidiary (incorporated by reference to Exhibit 2.1 to Union Pacific's
Current Report on Form 8-K filed on October 16, 2001).
(e)(2) Shareholder Agreement, dated October 15, 2001, between Union Pacific and Harold R. Tate
(incorporated by reference to Exhibit 99.2 to Union Pacific's Current Report on Form 8-K filed
on October 16, 2001).
(e)(3) Shareholder Agreement, dated October 15, 2001, between Union Pacific and Marvin L. Friedland
(incorporated by reference to Exhibit 99.3 to Union Pacific's Current Report on Form 8-K filed
on October 16, 2001).
(e)(4) Confidentiality Agreement, dated March 7, 2001, between Overnite Transportation Company and
Morgan Keegan & Company, Inc., as agent for Motor Cargo.
(e)(5) Information Statement of Motor Cargo, dated October 31, 2001 (included as Annex I hereto).*
--------
* Included in copies mailed to shareholders
B-15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
MOTOR CARGO INDUSTRIES, INC.
/s/ LYNN H. WHEELER
Lynn H. Wheeler
Vice President of Finance and
Chief Financial Officer
Dated: November 30, 2001
B-16
Annex I
Motor Cargo Industries, Inc.
845 West Center Street
North Salt Lake, Utah 84054
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being furnished to holders of the outstanding
shares of common stock, no par value, of Motor Cargo Industries, Inc., a Utah
corporation ("Motor Cargo"), in connection with the possible designation by
Union Pacific Corporation, a Utah corporation ("Union Pacific"), of at least a
majority of the members of the board of directors of Motor Cargo (the "Board of
Directors") pursuant to the terms of an Agreement and Plan of Merger, dated as
of October 15, 2001 (the "Merger Agreement"), by and among Motor Cargo, Union
Pacific and Motor Merger Co., a Utah corporation and a wholly-owned subsidiary
of Union Pacific ("Merger Subsidiary"). This information is being provided
solely for informational purposes and not in connection with a vote of Motor
Cargo's shareholders.
The Merger Agreement provides that upon the acceptance of shares of Motor
Cargo common stock for payment by Union Pacific in a tender offer for all
outstanding shares of Motor Cargo (the "Offer"), Union Pacific may designate
such number of directors on the Board of Directors (the "Union Pacific
Designees") as is equal to the product (rounded up to the next whole number)
obtained by multiplying the total number of directors then on the Board of
Directors by the percentage that the number of shares of Motor Cargo common
stock then owned or accepted for payment by Union Pacific bears to the total
number of shares of Motor Cargo common stock then outstanding; provided,
however, that prior to the completion of a merger as described in the Merger
Agreement (the "Merger"), the Board of Directors will always have at least two
members who were directors prior to the Offer. Motor Cargo will, to the extent
permitted by applicable law, increase the size of the Board of Directors or
secure the resignation of, or remove, existing directors so as to enable the
Union Pacific Designees to be appointed to the Board of Directors in accordance
with the Merger Agreement.
The information contained in this Annex I concerning Union Pacific and
Merger Subsidiary has been furnished to Motor Cargo by Union Pacific, and Motor
Cargo assumes no responsibility for the accuracy or completeness of any such
information.
VOTING SECURITIES
As of October 26, 2001, there were 6,473,140 shares of Motor Cargo common
stock outstanding. Each share of Motor Cargo common stock entitles its holder
to one vote.
I-1
BOARD OF DIRECTORS
The Board of Directors currently consists of six members, each of whom
serves a one-year term. The names and certain information concerning the
experience and background of the current directors are set forth below.
Name Age Position
---- --- --------
Harold R. Tate............. 75 Chief Executive Officer, Chairman of the Board,
Director
Louis V. Holdener.......... 63 President and Chief Operating Officer, Director
Marvin L. Friedland........ 59 Vice President, General Counsel and Secretary,
Director
Robert Anderson............ 80 Director
James Clayburn LaForce, Jr. 72 Director
Merlin J. Norton........... 72 Director
Harold R. Tate has over 50 years experience in the trucking industry and has
served as Chairman of the Board of Directors of Motor Cargo and its
predecessors since 1947. Mr. Tate served as Chief Executive Officer of Motor
Cargo and its predecessors from 1947 to March 1997, and was again elected as
Motor Cargo's Chief Executive Officer effective April 1, 2001. Mr. Tate also
serves as a member of the Board of Trustees of the Buffalo Bill Historical
Center.
Louis V. Holdener has over 30 years experience in the trucking industry. Mr.
Holdener has been employed by Motor Cargo since 1965, and was named President
and Chief Operating Officer of Motor Cargo and appointed to the Board of
Directors effective April 1, 2001. Mr. Holdener has also served as President of
Motor Cargo's primary operating subsidiary (the "Operating Subsidiary") since
1991, and served as Vice President of Motor Cargo from 1997 to 2001. Prior to
1991, Mr. Holdener served in various positions with Motor Cargo, including Vice
President of Operations of the Operating Subsidiary.
Marvin L. Friedland has served as Vice President and General Counsel of
Motor Cargo and its predecessors since 1982. Prior to joining Motor Cargo, Mr.
Friedland was an attorney in private practice. Mr. Friedland was appointed to
the Board of Directors in 1996. Mr. Friedland is a Certified Public Accountant
and a member of the California Bar and the Utah Bar.
Robert Anderson has served as a director of Motor Cargo since December 1,
1997. Mr. Anderson was formerly Chairman and Chief Executive Officer of
Rockwell International Corporation. He has served as Chairman Emeritus of
Rockwell International Corporation since 1990. Mr. Anderson is also a director
of Gulfstream Aerospace Corporation and Aftermarket Technology Corp.
James Clayburn LaForce, Jr. has served as a director of Motor Cargo since
December 1, 1997. Mr. LaForce is Dean Emeritus of the John B. Anderson School
of Management, University of California, Los Angeles. He is also a director of
BlackRock Funds, CancerVax Corporation, The Timken Company, Jacobs Engineering
Group, Inc. and Provident Investment Council Mutual Funds, and he is a trustee
of the Trust for Investment Managers.
Merlin J. Norton has served as a director of Motor Cargo since April 9,
2001. Mr. Norton is Chairman of Great Western Leasing and Sales, a provider of
trailers, storage containers and other equipment. Mr. Norton served as Chairman
of the Board of PST Vans, Inc. from 1980 to 1987. Prior to that, Mr. Norton
served as Chairman of the Board of FB Truckline Company from 1968 to 1978.
I-2
Meetings and Committees
The current committees of the Board of Directors include an Audit Committee,
a Compensation Committee and a Performance-Based Compensation Committee.
The functions of the Audit Committee are to recommend to the Board of
Directors independent auditors for Motor Cargo, to analyze the reports and
recommendations of such auditors and to review internal audit procedures and
controls. The Audit Committee consists of Robert Anderson, James Clayburn
LaForce, Jr. and Merlin J. Norton. Four meetings of the Audit Committee were
held in 2000.
The functions of the Compensation Committee are to review and adjust the
salaries of the principal officers and key executives of Motor Cargo. The
Compensation Committee also administers Motor Cargo's executive compensation
and benefit plans. The Compensation Committee consists of Harold R. Tate,
Robert Anderson, James Clayburn LaForce, Jr. and Merlin J. Norton. One meeting
of the Compensation Committee was held in 2000.
The sole function of the Performance-Based Compensation Committee is to
qualify certain stock options and rights granted under Motor Cargo's 1997 Stock
Option Plan as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code. The Performance-Based Compensation
Committee consists of Robert Anderson and James Clayburn LaForce, Jr. No
meetings of the Performance Based Compensation Committee were held in 2000.
The Board of Directors held a total of four regular meetings in 2000. During
2000, each incumbent director attended 75% or more of the total number of
meetings of the Board of Directors and the committees of the Board of Directors
on which he served that were held during the periods he served.
UNION PACIFIC DESIGNEES
Upon the acceptance of shares of Motor Cargo common stock for payment by
Union Pacific in the Offer, Motor Cargo expects that all of the members of the
Board of Directors will resign except for Marvin L. Friedland and Louis V.
Holdener. If the shares of Motor Cargo common stock tendered for payment in the
Offer represent two thirds of the outstanding shares of Motor Cargo common
stock, and if all but two of the current members of the Board of Directors
resign, Union Pacific will have the right to appoint four members of the Board
of Directors. Union Pacific has informed Motor Cargo that it will appoint James
R. Young, Carl W. von Bernuth, Mary S. Jones and Joseph E. O'Connor. If the
shares of Motor Cargo common stock tendered for payment in the Offer represent
more than two thirds of the outstanding shares of Motor Cargo common stock,
Union Pacific has informed Motor Cargo that it intends to appoint James J.
Theisen as an additional member of the Board of Directors. Assuming that all
but two of the current members of the Board of Directors resign upon the
acceptance of shares of Motor Cargo common stock for payment by Union Pacific
in the Offer, Union Pacific has informed Motor Cargo that it does not intend to
appoint more than five members of the Board of Directors. Each of James R.
Young, Carl W. von Bernuth, Mary S. Jones, Joseph E. O'Connor and James J.
Theisen, who together constitute the Union Pacific Designees, is an employee of
Union Pacific or its affiliates. Biographical information for each of these
persons is set forth below. Union Pacific has informed Motor Cargo that each of
these persons has consented to act as a director of Motor Cargo if so
designated. It is expected that none of the Union Pacific Designees will
receive any compensation for serving as a director. Pursuant to the Merger
Agreement, Union Pacific also has the right to designate the Union Pacific
Designees as members of the committees of the Board of Directors. Motor Cargo
has not been informed of any decision by Union Pacific as to the membership of
any such committees.
James R. Young, 48, was elected Executive Vice President--Finance of Union
Pacific and Chief Financial Officer of Union Pacific Railroad Company effective
December 1, 1999. Mr. Young was elected Controller of
I-3
Union Pacific and Senior Vice President--Finance of Union Pacific Railroad
Company effective March 1999 and Senior Vice President--Finance of Union
Pacific effective June 1998. He served as Treasurer of Union Pacific Railroad
Company from June 1998 to March 1999. Mr. Young was Vice President--Customer
Service Planning and Quality of Union Pacific Railroad Company from April 1998
to June 1998, Vice President--Quality and Operations Planning from September
1997 to April 1998 and Vice President--Finance and Quality from September 1995
to September 1997.
Carl W. von Bernuth, 57, was elected Corporate Secretary of Union Pacific
effective April 1997. Mr. von Bernuth has been Senior Vice President and
General Counsel of Union Pacific during the past five years.
Mary S. Jones, 48, was elected Vice President and Treasurer of Union Pacific
effective March 1999. Ms. Jones served as Vice President--Investor Relations of
Union Pacific from June 1998 to March 1999. She was Assistant Vice
President--Treasury and Assistant Treasurer of Union Pacific from September
1996 to June 1998 and prior thereto she was Assistant Treasurer.
Joseph E. O'Connor, Jr., 44, was named Vice President--Planning & Analysis
for Union Pacific Railroad Company in February 2000. Mr. O'Connor served as
Vice President--Bulk Products, Network Design & Integration for Union Pacific
Railroad Company from September 1998 to January 2000 and prior thereto he was
Vice President and Controller for Union Pacific.
James J. Theisen, Jr., 38, was named Senior Corporate Counsel for Union
Pacific in June 1999. Mr. Theisen has served as Assistant Secretary of Union
Pacific since November 1999 and Assistant Secretary of Union Pacific Railroad
Company since May 2000. Mr. Theisen served as General Attorney for Union
Pacific Railroad Company from August 1997 to May 1999 and prior thereto was
Senior Corporate Attorney for Union Pacific.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and key employees of Motor Cargo.
Name Age Position
---- --- --------
Harold R. Tate....... 75 Chairman and Chief Executive Officer, Director
Louis V. Holdener.... 63 President and Chief Operating Officer, Director
Marvin L. Friedland.. 59 Vice President and General Counsel, Secretary, Director
Lynn H. Wheeler...... 60 Vice President and Chief Financial Officer
R. Scott Price....... 37 Vice President of Sales and Marketing
Matthew T. McClure(1) 39 Vice President of Operations
Steven E. Wynn(1).... 51 Vice President of Human Resources
Kevin L. Avery(1).... 43 Vice President of Traffic
--------
(1) Messrs. McClure, Wynn and Avery are officers of the Operating Subsidiary
and are not officers of Motor Cargo.
Harold R. Tate has over 50 years of experience in the trucking industry and
has served as Chairman of the Board of Motor Cargo and its predecessors since
1947. Mr. Tate served as Chief Executive Officer of Motor Cargo and its
predecessors from 1947 to March 1997, and was again elected as Motor Cargo's
Chief Executive Officer effective April 1, 2001. Mr. Tate also serves as a
member of the Board of Trustees of the Buffalo Bill Historical Center.
Louis V. Holdener has over 30 years experience in the trucking industry. Mr.
Holdener has been employed by Motor Cargo since 1965, and was named President
and Chief Operating Officer of Motor Cargo and appointed to the Board of
Directors effective April 1, 2001. Mr. Holdener has also served as President of
the
I-4
Operating Subsidiary since 1991, and served as Vice President of Motor Cargo
from 1997 to 2001. Prior to 1991, Mr. Holdener served in various positions with
Motor Cargo, including Vice President of Operations of the Operating Subsidiary.
Marvin L. Friedland has served as Vice President and General Counsel of
Motor Cargo and its predecessors since 1982. Prior to joining Motor Cargo, Mr.
Friedland was an attorney in private practice. Mr. Friedland was appointed to
the Board of Directors in 1996. Mr. Friedland is a Certified Public Accountant
and a member of the California Bar and the Utah Bar.
Lynn H. Wheeler has been employed by Motor Cargo since 1983 and has served
as Vice President of Finance of the Operating Subsidiary since 1988. Mr.
Wheeler was appointed Vice President and Chief Financial Officer of Motor Cargo
in March 1997. Mr. Wheeler is a Certified Public Accountant, a Certified
Internal Auditor and a member of the American Institute of Certified Public
Accountants.
R. Scott Price joined Motor Cargo in 1986 and has served as a Vice President
of Sales and Marketing of Motor Cargo since February 1999. From October 1997 to
February 1999, Mr. Price served as a Vice President of Motor Cargo responsible
for overseeing MCDS. From 1995 to 1997, Mr. Price served as Vice President of
Sales of the Operating Subsidiary. From 1986 to 1995, Mr. Price held various
positions with the Operating Subsidiary, including Service Center Manager and
Director of Corporate Accounts.
Matthew T. McClure joined Motor Cargo in 1987 and has served as Vice
President of Operations of the Operating Subsidiary since January 2001. Prior
to that, Mr. McClure served as Director of Linehaul Operations for the
Operating Subsidiary from 1998 to 2001. From 1987 to 1998, Mr. McClure served
in various positions with Motor Cargo.
Steven E. Wynn has been employed by the Operating Subsidiary since 1973 and
has served as Vice President of Human Resources of the Operating Subsidiary
since February 1999. From 1991 to 1999, Mr. Wynn served as Vice President of
Operations of the Operating Subsidiary. From 1973 to 1991, Mr. Wynn served in
various positions, including Director of Linehaul Operations and Director of
Operations for the Operating Subsidiary.
Kevin L. Avery joined Motor Cargo in 1985 and has served as Vice President
of Traffic of the Operating Subsidiary since 1992. From 1985 to 1992, Mr. Avery
served in various positions, including Director of Pricing, Rate Department
Manager and Director of Quality Assurance for the Operating Subsidiary.
I-5
BENEFICIAL OWNERSHIP OF MOTOR CARGO COMMON STOCK
Set forth below is certain information as of October 26, 2001 (except as
otherwise indicated below) with respect to the beneficial ownership of Motor
Cargo common stock by (i) each person who, to the knowledge of Motor Cargo, is
the beneficial owner of more than 5% of the outstanding shares of Motor Cargo
common stock (Motor Cargo's only class of voting securities), (ii) each
director, (iii) each Named Executive Officer (as defined in the Summary
Compensation Table, below) and (iv) all directors and executive officers as a
group.
Right to Acquire
Amount and Nature of Within 60 Days of Percent of
Name and Address of Beneficial Owner(1) Beneficial Ownership(2) October 19, 2001 Class
--------------------------------------- ----------------------- ----------------- ------------
Averitt, Inc.(3)............................... 369,600 -- 5.7%
J.P. Morgan Chase & Co.(4)..................... 438,455 -- 6.8%
Directors:
Harold R. Tate................................. 3,858,000 -- 59.6%
Louis V. Holdener.............................. 15,640 40,000 Less than 1%
Marvin L. Friedland............................ 188,153 32,500 3.2%
Robert Anderson................................ -- 17,500 Less than 1%
James Clayburn LaForce, Jr..................... 2,000 17,500 Less than 1%
Merlin J. Norton............................... -- -- --
Nondirector Named Executive Officers:
Marshall L. Tate(5)............................ 141,153 -- 2.7%
Lynn H. Wheeler................................ 1,000 27,500 Less than 1%
R. Scott Price................................. -- 25,000 Less than 1%
All directors and executive officers as a group
(12 persons)................................. 4,206,461 211,500 65.7%
--------
(1) Unless otherwise indicated in these footnotes, the mailing address of each
beneficial owner listed is 845 West Center Street, North Salt Lake, Utah
84054.
(2) Except as otherwise noted, each of the beneficial owners listed in the
table has, to the knowledge of Motor Cargo, sole voting and investment
power with respect to the indicated shares of Motor Cargo common stock.
(3) The mailing address for Averitt, Inc. is Corporate Service Center,
Perimeter Place One, 518 Old Kentucky Road, Cookeville, Tennessee 38501.
(4) The mailing address for J.P. Morgan Chase & Co., and its wholly-owned
subsidiary, Robert Fleming, Inc., is 270 Park Avenue, New York, New York
10017.
(5) Marshall L. Tate resigned as President and Chief Executive Officer of
Motor Cargo on March 31, 2001. The information regarding Mr. Tate's
beneficial ownership is as of that date.
On October 15, 2001, Union Pacific entered into Shareholder Agreements with
two principal shareholders of Motor Cargo who own, in the aggregate,
approximately 62.5% of the outstanding shares of Motor Cargo common stock. For
a description of these agreements, see "The Shareholder Agreements" under Item
3 of the Schedule 14D-9 to which this Information Statement is attached.
I-6
EXECUTIVE COMPENSATION
Set forth below is certain information with respect to the compensation paid
by Motor Cargo to the Chairman of the Board, the President and Chief Executive
Officer and each of the other three most highly compensated current executive
officers of Motor Cargo (each, a "Named Executive Officer"), for services in
all capacities to Motor Cargo and its subsidiaries during the years ended 2000,
1999 and 1998.
Summary Compensation Table
Long Term Compensation
------------------------------
Annual Compensation Awards Payouts
------------------------ --------------------- ------- ---------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation(1) Award(s) SARs(2) Payouts sation(3)
Position Year ($) ($) ($) ($) (#) ($) ($)
---------------------------- ---- ------- ------ --------- ---------- ---------- ------- ---------
Harold R. Tate.............. 2000 250,000 -- -- -- -- -- --
Chairman of the Board and 1999 250,000 -- -- -- -- -- --
Chief Executive Officer (4) 1998 250,000 -- -- -- -- -- --
Marshall L. Tate............ 2000 175,000 41,040 -- -- -- -- --
President and Chief 1999 175,000 23,625 -- -- 65,000 -- --
Executive Officer 1998 175,000 21,000 -- -- -- -- --
until March 31, 2001(4)
Marvin L. Friedland......... 2000 140,769 25,080 -- -- -- -- 19,639
Vice President and 1999 130,000 16,800 -- -- 32,500 -- 19,375
General Counsel............ 1998 130,000 16,000 -- -- -- -- 24,208
Louis V. Holdener........... 2000 146,538 33,659 -- -- -- -- 22,552
President (4).............. 1999 135,000 23,625 -- -- 40,000 -- 19,870
1998 135,000 21,000 -- -- -- -- 24,650
Lynn H. Wheeler............. 2000 112,231 25,080 -- -- -- -- 21,108
Vice President and 1999 98,000 16,800 -- -- 27,500 -- 19,292
Chief Financial Officer.... 1998 98,000 16,000 -- -- -- -- 23,364
--------
(1) Perquisites and other personnel benefits, securities or property, in the
aggregate, are less than either $50,000 or 10% of the total annual salary
and bonus reported for the named executive officer.
(2) The options granted in 1999, were granted on January 26, 1999 and reflect
options that replaced options granted in 1997, which were cancelled, as
well as grants of new options. The options have an exercise price of $7.50
per share and vest in equal installments over a four year period beginning
with the first anniversary of the date the options were granted and each
year thereafter. See "1997 Stock Option Plan" below.
(3) Amounts in this column include matching contributions made by Motor Cargo
under its 401(k) plan on behalf of Mr. Friedland, Mr. Holdener and Mr.
Wheeler of $1,652, $4,597 and $3,868, respectively, in 2000. Amounts in
this column also include accrued benefits under salary continuation
agreements between Motor Cargo and Mr. Friedland, Mr. Holdener and Mr.
Wheeler of $17,987, $17,955 and $17,240, respectively, in 2000.
(4) Marshall L. Tate resigned as President and Chief Executive Officer, and as
a director of Motor Cargo, effective March 31, 2001. Harold R. Tate, Motor
Cargo's Chairman, was elected to serve as Chief Executive Officer of Motor
Cargo upon Marshall Tate's resignation. At that time, Louis V. Holdener was
also promoted to serve as President of Motor Cargo.
I-7
The following table provides information as to the value of options held by
each of the Named Executive Officers at the end of 2000 measured in terms of
the last reported sale price for Motor Cargo common stock on December 29, 2000
($6.75, as reported on the Nasdaq National Market System).
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Shares Number of Securities Value of Unexercised In-
Acquired Underlying Unexercised the-Money Options/SARs at
on Value Options/SARs at FY-End (#) FY-End (#) Exercisable/
Name Exercise (#) Realized Exercisable/Unexercisable Unexercisable
---- ------------ -------- -------------------------- -------------------------
Harold R. Tate...... -- -- 0/0 0/0
Marshall L. Tate (1) -- -- 16,250/48,750 0/0
Marvin L. Friedland. -- -- 8,125/24,375 0/0
Louis V. Holdener... -- -- 10,000/30,000 0/0
Lynn H. Wheeler..... -- -- 6,875/20,625 0/0
--------
(1) Marshall L. Tate resigned as President and Chief Executive Officer of Motor
Cargo on March 31, 2001, and all of the options held by him were cancelled
as of that date.
1997 Stock Option Plan
On October 1, 1997, the Board of Directors adopted the Motor Cargo
Industries, Inc. 1997 Stock Option Plan (the "1997 Stock Option Plan"). The
purpose of the 1997 Stock Option Plan is to provide certain of Motor Cargo's
key employees who are responsible for the continued growth of Motor Cargo an
opportunity to acquire a proprietary interest in Motor Cargo and thereby create
in such key employees an increased interest in and a greater concern for the
welfare of Motor Cargo. The 1997 Stock Option Plan contains provisions for
granting various stock-based awards, including incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986 as amended (the
"Code"), nonqualified stock options and stock appreciation rights. The term of
the 1997 Stock Option Plan is ten years, subject to earlier termination or
amendment.
The Compensation Committee of the Board of Directors administers the 1997
Stock Option Plan. Under the terms of the 1997 Stock Option Plan, the committee
of the Board of Directors administering the plan is required to be composed of
two or more directors. The Compensation Committee has the authority to
interpret the 1997 Stock Option Plan and to determine and designate the persons
to whom options or awards shall be made and the terms, conditions and
restrictions applicable to each option or award (including, but not limited to,
the price, any restriction or limitation, any vesting schedule or acceleration
thereof, and any forfeiture restrictions). The Board of Directors may amend the
1997 Stock Option Plan but may not, without the prior approval of the
shareholders of Motor Cargo, amend the plan to increase the total number of
shares reserved for options and rights under the plan, reduce the exercise
price of any option granted under the plan that is intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, modify
the provisions of the plan relating to eligibility, or materially increase the
benefits accruing to participants under the plan.
On January 26, 1999, the Board of Directors amended the 1997 Stock Option
Plan to permit administration by a committee consisting of "outside directors"
for the purpose of qualifying certain stock options and rights granted under
the 1997 Stock Option Plan as "performance-based compensation" within the
meaning of Section 162(m) of the Code. The Board of Directors has established
the Performance-Based Compensation Committee, consisting of Robert Anderson and
James Clayburn LaForce, Jr., for this purpose. The Compensation Committee
continues to administer all other aspects of the 1997 Stock Option Plan.
Motor Cargo has reserved 500,000 shares of common stock for issuance
pursuant to the 1997 Stock Option Plan. As of October 26, 2001, options to
purchase a total of 297,900 shares of common stock were outstanding under the
1997 Stock Option Plan, including options to purchase an aggregate of 100,000
shares held by certain Named Executive Officers. All such outstanding options
vest over a four year period, with 25% of these options
I-8
vesting on each of the first, second, third and fourth anniversaries of the
date of grant. As a result of the approval of the Merger Agreement by the Board
of Directors, all options outstanding under the 1997 Stock Option Plan became
fully vested and exercisable in accordance with the terms of the 1997 Stock
Option Plan. As permitted by the 1997 Stock Option Plan, the Board of Directors
has determined that any unexercised options outstanding on the date the Merger
is consummated will terminate, and in consideration of such termination, the
holder of each option so terminated will be entitled to receive, with respect
to each share of common stock subject to such option, an amount in cash (net of
applicable withholdings) equal to the excess of $12.10 over the per share
exercise price of such option.
401(k) Profit Sharing Plan
Motor Cargo maintains a defined contribution plan (the "401(k) Plan"), which
is intended to satisfy the tax qualification requirements of the Code. All
Motor Cargo personnel who work 1,000 or more hours per year are eligible to
participate in the 401(k) Plan after one year of service with Motor Cargo. The
401(k) Plan permits participants to contribute between 1% and 15% of their
annual compensation from Motor Cargo, subject to the limit imposed by the Code.
Motor Cargo is obligated to match at least 25% of employee contributions, up to
6% of a participant's annual compensation. All amounts contributed by a
participant fully vest immediately. A participant becomes vested over time and
is fully vested in any Motor Cargo matching contributions after seven years of
service. The 401(k) Plan also permits discretionary contributions by Motor
Cargo. Expenses for Motor Cargo contributions amounted to $475,000, $421,000
and $495,000 in 1998, 1999 and 2000, respectively.
Pension Plan
Motor Cargo has a defined benefit pension plan (the "Pension Plan") covering
substantially all of its employees. Benefits under the Pension Plan are based
upon years of service and hours of service in each year of service. A
participant is fully vested after five years of employment. Once vested,
employees are entitled to receive an annual benefit for each year of service in
which such employee worked at least 1,000 hours. The amount of benefit for each
year of service ranges from $144 for 1,000 hours of service to $240 for 1,800
hours or more of service. Harold R. Tate receives an annual benefit of $17,256
under the Pension Plan. The estimated annual benefits payable upon retirement
at normal retirement age for Marshall L. Tate, Marvin L. Friedland, Louis V.
Holdener, and Lynn H. Wheeler are $4,105, $5,832, $7,320, and $5,572,
respectively.
Salary Continuation Agreements
Motor Cargo has salary continuation agreements with four of its key
management employees: Marvin L. Friedland, Louis V. Holdener, Lynn H. Wheeler
and Steven E. Wynn. Under the agreements, Motor Cargo is obligated to provide
for each such employee or his beneficiaries, during a period of not more than
ten years after the employee's death, disability or retirement, annual benefits
ranging from $17,000 to $23,000. Motor Cargo's current liability under each
agreement is as follows: Marvin L. Friedland, $156,760; Louis V. Holdener,
$156,710; Lynn H. Wheeler, $150,386; and Steven E. Wynn, $77,318.
Compensation Committee Report on Executive Compensation
Prior to November 28, 1997, the Board of Directors did not have a
compensation committee and the Board of Directors as a whole determined the
compensation to be paid to the executive officers of Motor Cargo. On November
28, 1997, the Board of Directors established a compensation committee. The
functions of the Compensation Committee are to review and adjust the salaries
of the principal officers and key executives of Motor Cargo. The Compensation
Committee also administers Motor Cargo's executive compensation and benefit
plans. The Compensation Committee consists of Harold R. Tate, Robert Anderson,
James Clayburn LaForce, Jr. and Merlin J. Norton.
The Compensation Committee considers a number of factors in establishing
compensation for executive officers, including the Chief Executive Officer and
the other Named Executive Officers. The goal of the
I-9
Compensation Committee is to create compensation packages for officers and key
employees that will attract, retain and motivate executive personnel who are
capable of achieving Motor Cargo's short-term and long-term financial and
strategic goals. Executive compensation at Motor Cargo is made up of three
elements: (i) base salary, (ii) bonuses and (iii) grants of equity-based
compensation (e.g., stock options and restricted stock).
Base Salary. Base salaries for all of the executive officers of Motor Cargo
for 1998 and 1999 were established by the Board of Directors based upon each
employee's job responsibilities. During 2000, the Compensation Committee
adjusted salaries of the executive officers, other than the Chairman and the
President and Chief Executive Officer, in order to bring these salaries in line
with market rates.
Bonuses. The Board of Directors awarded cash bonuses to executive officers
during 1998 based upon the financial performance of Motor Cargo. The
Compensation Committee awarded bonuses for 1999 and 2000. The Compensation
Committee considered a number of factors in awarding bonuses, including the
financial performance of Motor Cargo and the achievement by Motor Cargo of
short-term and long-term financial and strategic goals.
Stock Options and Restricted Stock. In addition to salary and bonus, Motor
Cargo has adopted the 1997 Stock Option Plan. Under the 1997 Stock Option Plan,
officers and key employees are eligible to receive awards of stock options,
stock appreciation rights and restricted stock. The number of stock options
and/or shares of restricted stock granted to each executive officer is
determined by a competitive compensation analysis and each individual's salary
and responsibility.
Harold R. Tate
Robert Anderson
James Clayburn LaForce, Jr.
Merlin J. Norton
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Motor Cargo's Chairman and Chief
Executive Officer and three non-employee directors. Currently, the members of
the Compensation Committee are Harold R. Tate, Robert Anderson, James Clayburn
LaForce, Jr. and Merlin J. Norton. None of the executive officers of Motor
Cargo serve as a director of another corporation in a case where an executive
officer of such other corporation serves as a director of Motor Cargo.
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Corporate Performance
The following graph compares the performance (total return on investment as
measured by the change in the year-end stock price plus reinvested dividends)
of $100 invested in Motor Cargo common stock with that of $100 invested in the
U.S. Nasdaq Index and $100 invested in the Nasdaq Transportation Index for the
period from November 24, 1997 to December 31, 2000. Index data was furnished by
Standard & Poor's Compustat Services, Inc. Prior to Motor Cargo's initial
public offering in November 1997, there was no established trading market for
Motor Cargo common stock. Accordingly, no performance comparison is presented
for any period prior to November 25, 1997.
[CHART]
Base period Indexed Returns Years Ending
Company/Index 25 Nov 97 Dec 75 Dec 98 Dec 99 Dec 00
------------- --------- ------ ------ ------ ------
Motor Cargo Industries, Inc. 100 100.00 67.67 38.54 56.25
Masdaq US 100 99.07 139.71 259.66 156.26
Nasdaq Transportation 100 101.45 91.21 88.16 80.13
Compensation of Directors
Motor Cargo pays each non-employee director $2,500 for each meeting of the
Board of Directors and $500 for each telephonic meeting of the Board of
Directors attended. Motor Cargo also reimburses such directors for their
expenses incurred in connection with their activities as directors. On November
24, 1997, in connection with Motor Cargo's initial public offering, a
non-qualified option to purchase 10,000 shares of Motor Cargo common stock at
the initial public offering price of $12.00 per share was granted to each of
Robert Anderson and James Clayburn LaForce, Jr.
On January 26, 1999, the Board of Directors adopted the 1999 Stock Option
Plan for Non-Employee Directors (the "1999 Stock Option Plan"). The purpose of
the plan is to encourage the highest level of performance from those members of
the Board of Directors who are not employees of Motor Cargo by providing them
with a proprietary interest in the financial success of Motor Cargo. Pursuant
to the 1999 Stock Option Plan, on January 26, 1999, the Board of Directors
approved the cancellation of the existing stock options held by Messrs.
Anderson and LaForce and granted new options to Mr. Anderson and Mr. LaForce.
An option to purchase 17,500 shares of common stock at $7.50 per share was
granted to each of Mr. Anderson and Mr. LaForce. The Board of Directors granted
an option to Merlin J. Norton to purchase 17,500 shares of common stock at
$8.19 per share upon his appointment to the Board of Directors on April 9,
2001. All outstanding options under the 1999 Stock Option Plan vest over a
four-year period, with 25% of these options vesting on each of the first,
second, third and fourth anniversaries of the date of grant. As a result of the
approval of the Merger Agreement by the Board of Directors, all options
outstanding under the 1999 Stock Option Plan became fully vested and
exercisable in accordance with the terms of the 1999 Stock Option Plan. As
permitted by the 1999 Stock Option Plan, the Board of Directors has determined
that any unexercised options outstanding on the date the Merger is consummated
will terminate, and in consideration of such termination, the holder of each
option so terminated will be entitled to receive, with respect to each share of
common stock subject to such option, an amount in cash (net of applicable
withholdings) equal to the excess of $12.10 over the per share exercise price
of such option.
I-11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to Motor Cargo during its most recent fiscal year and Form 5 and amendments
thereto furnished to Motor Cargo with respect to its most recent fiscal year,
and any written representations furnished to Motor Cargo, Motor Cargo believes
that for the year ended December 31, 2000, all persons subject to the reporting
requirements of Section 16(a) of the Exchange Act filed the required reports on
a timely basis.
AUDIT COMMITTEE REPORT
The members of the Audit Committee are Robert Anderson, James Clayburn
LaForce, Jr. and Merlin J. Norton, each of whom is independent as defined in
Rule 4200(a)(15) of the National Association of Securities Dealers' listing
standards. The Board of Directors has adopted a written charter for the Audit
Committee.
The Audit Committee has reviewed and discussed Motor Cargo's audited
financial statements for the fiscal year ended December 31, 2000 with
management. The Audit Committee has also discussed with Grant Thornton LLP,
Motor Cargo's independent auditors, the matters required to be discussed by SAS
61. The Audit Committee has also received the written disclosures and the
letter from Grant Thornton required by Independence Standards Board Standard
No. 1 and has discussed with Grant Thornton the matter of Grant Thornton's
independence.
Based on the review and discussions described in the preceding paragraph,
the Audit Committee recommended to the Board of Directors that Motor Cargo's
audited financial statements for the fiscal year ended December 31, 2000 be
included in Motor Cargo's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 for filing with the Securities and Exchange Commission.
Robert Anderson
James Clayburn LaForce, Jr.
Merlin J. Norton
I-12
Annex II
[GRAPHIC]
LETTERHEAD OF MORGAN KEEGAN
October 15, 2001
Board of Directors
Motor Cargo Industries, Inc.
845 W. Center Street
Salt Lake City, UT 84054
Members of the Board:
We understand that Motor Cargo Industries, Inc. ("Motor Cargo") and Union
Pacific Corporation ("UP") propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated October 12, 2001 (the
"Agreement"). The Agreement contains an offer (the "Exchange Offer") by UP to
exchange the Consideration (defined below) for each share of common stock of
Motor Cargo, no par value per share, issued and outstanding (the "Motor Cargo
Common Stock") and provides, among other things, for the merger of Motor Cargo
with and into a wholly-owned subsidiary of UP (the "Merger") after completion
of the Exchange Offer (collectively the Exchange Offer and Merger are sometimes
hereinafter called the "Transaction"). The Exchange Offer is an offer by
UP to exchange each issued and outstanding share of Motor Cargo Common Stock
for .26 shares of common stock, par value of $2.50, of UP (the "UP Common
Stock") (the "Stock Consideration"), or $12.10 per share in cash (the "Cash
Consideration"), subject to certain procedures and limitations contained in the
Agreement, as to which procedures and limitations we are expressing no opinion.
After completing the Exchange Offer, in the Merger each share of Motor Cargo
Common Stock not so exchanged in the Exchange Offer (other than shares of Motor
Cargo Common Stock acquired by UP in the Exchange Offer or otherwise held by
UP, Motor Cargo or their respective affiliates) shall be converted into the
right to receive the Cash Consideration. The Stock Consideration and Cash
Consideration are hereafter collectively referred to as the "Consideration".
Upon consummation of the Transaction, the business historically conducted by
Motor Cargo will be operated as a separate wholly owned subsidiary of UP. The
terms and conditions of the Transaction are more fully set forth in the
Agreement.
You have asked for our opinion as to whether the Consideration pursuant to
the Agreement is fair, from a financial point of view, to the holders of the
Motor Cargo Common Stock.
For purposes of the opinion set forth herein, we have:
i. reviewed the draft Agreement and the terms of the Transaction and
drafts of certain related documents;
ii. reviewed certain publicly available business and financial
information relating to Motor Cargo and UP;
iii. reviewed certain other information provided to us by Motor Cargo and
UP and discussed the business prospects of Motor Cargo and UP with Motor
Cargo's and UP's management;
II-1
iv. reviewed the reported historical prices and historical trading
activity for Motor Cargo Common Stock and UP Common Stock for the period
from October 16, 2000 to the present;
v. compared the financial performance of Motor Cargo and UP and the
prices and trading activity of Motor Cargo Common Stock and UP Common Stock
with that of certain other publicly-traded companies and their securities;
vi. reviewed the financial terms, to the extent publicly available, of
certain other business combinations and other transactions that we deemed
relevant;
vii. reviewed the potential pro forma impact of the Transaction on the
estimated earnings per share for the year ended December 31, 2002 of UP
under certain scenarios;
viii. performed such other analyses and considered such other factors as
we deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion and have not assumed any obligation independently to verify such
information. We have assumed that the internal financial statements and other
financial and operating data have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the management of Motor
Cargo. We have also assumed that there have been no material changes in Motor
Cargo's or UP's assets, financial condition, results of operations, business or
prospects since the respective dates of the last financial statements made
available to us. We have not made any independent valuation, inspection or
appraisal of the assets or liabilities of Motor Cargo or UP, nor have we been
furnished with any such appraisals or valuations. In addition, you have
informed us that it is the intention of the parties that the Transaction will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and we have assumed that the
Transaction will be consummated in accordance with the terms set forth in the
draft Agreement and in compliance with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and all other applicable federal, state and
local statutes, rules, regulations and ordinances. Our opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof. In addition, we
are not expressing any opinion as to the actual value of the UP Common Stock or
the prices at which the UP Common Stock will trade following the date of this
opinion.
We have acted as financial advisor to Motor Cargo in connection with the
Transaction and will receive a fee for such services, a portion of which will
be paid in connection with the delivery of this opinion and a significant
portion of which is contingent upon consummation of the Transaction.
Motor Cargo has agreed to indemnify us for certain liabilities that may
arise out of rendering this opinion. In the past, Morgan Keegan & Company, Inc.
has provided financial advisory and financing services for Motor Cargo and has
received fees for the rendering of these services. In the ordinary course of
our business, we may actively trade in the equity securities of Motor Cargo and
UP for our own account and the accounts of our customers and, accordingly, may
at any time hold a significant long or short position in such securities.
Our opinion is directed to the Board of Directors of Motor Cargo in
connection with its consideration of the Transaction and recommendation of the
Transaction to the holders of Motor Cargo Common Stock. Our opinion is not a
recommendation to any holder of Motor Cargo Common Stock to tender any shares
in the Exchange Offer or vote for or against the Merger, nor is our opinion a
recommendation or advice to any such holder as to the type of Consideration to
be received in the Transaction. Our opinion addresses only the fairness, from a
financial point of view, of the Consideration to the holders of Motor Cargo
Common Stock and does not address the underlying business decision of Motor
Cargo to engage in the Transaction, the relative merits of the Transaction as
compared to any other alternative business strategy that might exist for Motor
Cargo or the effect of any other transaction in which Motor Cargo might engage.
Our opinion is not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, tender offer statement, proxy statement or
any other document, nor shall this opinion be used for any other purpose,
without our prior written consent; provided,
II-2
however, that we hereby consent to the inclusion of this opinion as an exhibit
and/or appendix to Motor Cargo's Schedule 14D-9 and, if necessary, the proxy
statement in respect of the Transaction filed with the Securities and Exchange
Commission and delivered to Motor Cargo shareholders.
Based upon and subject to the foregoing, and in reliance thereon, we are of
the opinion on the date hereof that the Consideration is fair, from a financial
point of view, to the holders of the Motor Cargo's Common Stock.
Very truly yours,
Morgan Keegan & Company, Inc.
/s/ JOHN H. GRAYSON JR.
By:
John H. Grayson, Jr.
Managing Director
II-3
ANNEX C
AGREEMENT AND PLAN OF MERGER
By and Among
MOTOR CARGO INDUSTRIES, INC.
UNION PACIFIC CORPORATION
and
MOTOR MERGER CO.
Dated as of October 15, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
Section 1.1. Definitions..................................................... 2
ARTICLE II THE OFFER
Section 2.1. The Offer....................................................... 5
Section 2.2. Company Actions................................................. 6
Section 2.3. Directors of the Company........................................ 7
ARTICLE III THE MERGER
Section 3.1. The Merger...................................................... 8
Section 3.2. The Closing; Effective Time..................................... 8
Section 3.3. Conversion of Securities........................................ 8
Section 3.4. Exchange of Certificates........................................ 9
Section 3.5. Options......................................................... 10
Section 3.6. Dissenting Shares............................................... 10
Section 3.7. Articles of Incorporation and Bylaws............................ 10
Section 3.8. Directors and Officers.......................................... 11
Section 3.9. Other Effects of Merger......................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Organization and Qualification.................................. 11
Section 4.2. Capitalization.................................................. 11
Section 4.3. Corporate Authorization; Validity of Agreement; Company Action.. 12
Section 4.4. Consents and Approvals; No Violations........................... 13
Section 4.5. SEC Reports and Financial Statements............................ 13
Section 4.6. Absence of Certain Changes...................................... 14
Section 4.7. No Undisclosed Liabilities...................................... 14
Section 4.8. Schedule 14D - 9; Proxy Statement............................... 14
Section 4.9. Employee Benefit Plans; ERISA................................... 15
Section 4.10. Labor Matters................................................... 16
Section 4.11. Litigation; Compliance with Law................................. 18
Section 4.12. Taxes........................................................... 18
Section 4.13. Contracts....................................................... 19
Section 4.14. Environmental Matters........................................... 20
Section 4.15. Intellectual Property........................................... 21
Section 4.16. Title, Sufficiency and Condition of Assets...................... 22
Section 4.17. Transactions with Affiliates.................................... 23
Section 4.18. Opinion of Financial Advisor.................................... 23
Section 4.19. Broker's or Finder's Fee........................................ 23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 5.1. Organization and Qualification.................................. 23
Section 5.2. Corporate Authorization; Validity of Agreement; Necessary Action 23
Section 5.3. Consents and Approvals; No Violations........................... 24
Section 5.4. Information To Be Supplied...................................... 24
Section 5.5. SEC Reports and Financial Statements............................ 25
Section 5.6. Financing....................................................... 25
Section 5.7. Taxes........................................................... 25
i
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----
ARTICLE VI COVENANTS
Section 6.1. Interim Operations of the Company.......................... 25
Section 6.2. Preparation of Proxy Statement; Company Shareholder Meeting 27
Section 6.3. Access to Information...................................... 28
Section 6.4. No Solicitation; Acquisition Proposals..................... 28
Section 6.5. Modifications to Recommendations........................... 30
Section 6.6. HSR Act Filings; Reasonable Best Efforts................... 30
Section 6.7. Litigation................................................. 31
Section 6.8. Certain Benefit Matters.................................... 31
Section 6.9. Additional Agreements...................................... 32
Section 6.10. Publicity.................................................. 32
Section 6.11. Notification of Certain Matters............................ 32
Section 6.12. Directors' and Officers' Indemnification and Insurance..... 32
Section 6.13. Rule 145 Affiliates........................................ 33
Section 6.14. Cooperation................................................ 33
Section 6.15. Tax-Free Reorganization Treatment.......................... 33
Section 6.16. Conveyance Taxes........................................... 34
ARTICLE VII CONDITIONS
Section 7.1. Conditions to Each Party's Obligations..................... 34
Section 7.2. Conditions to Obligations of Parent........................ 34
Section 7.3. Frustration of Conditions.................................. 35
ARTICLE VIII TERMINATION AND ABANDONMENT; EXPENSES
Section 8.1. Termination................................................ 35
Section 8.2. Effect of Termination and Abandonment...................... 35
Section 8.3. Fees and Expenses.......................................... 35
ARTICLE IX MISCELLANEOUS
Section 9.1. Amendment and Modification................................. 37
Section 9.2. Waiver of Compliance; Consents............................. 37
Section 9.3. Survival................................................... 37
Section 9.4. Notices.................................................... 37
Section 9.5. Binding Effect; Permitted Assignment....................... 38
Section 9.6. Governing Law.............................................. 38
Section 9.7. Submission to Jurisdiction; Waivers........................ 38
Section 9.8. WAIVER OF JURY TRIAL....................................... 39
Section 9.9. Counterparts............................................... 39
Section 9.10. Interpretation............................................. 39
Section 9.11. Entire Agreement........................................... 39
Section 9.12. Severability............................................... 39
Section 9.13. Third Party Beneficiaries.................................. 40
Section 9.14. Disclosure Schedule........................................ 40
Annex A Conditions of the Offer.................................... A-1
ii
INDEX OF DEFINED TERMS
Page
----
Acquisition Proposal............................................ 46
affiliate....................................................... 61
Agreement....................................................... 1
Antitrust Laws.................................................. 2
Articles of Merger.............................................. 12
Beneficial Owner................................................ 2
Beneficially Owning............................................. 2
Benefit Plans................................................... 23
Certificates.................................................... 13
Closing......................................................... 12
Closing Date.................................................... 12
Code............................................................ 2
Company......................................................... 1
Company Agreement............................................... 30
Company Group................................................... 28
Company Intellectual Property................................... 33
Company Material Adverse Effect................................. 2
Company Options................................................. 17
Company Plans................................................... 17
Company SEC Documents........................................... 21
Company Shareholder Approval.................................... 18
Company Shareholder Meeting..................................... 43
Company Shares.................................................. 1
Confidentiality Agreement....................................... 45
Consent......................................................... 20
Continuing Director............................................. 10
Conveyance Taxes................................................ 53
Copyrights...................................................... 33
Disclosure Schedule............................................. 3
Dissenting Shares............................................... 15
Drop Dead Date.................................................. 55
Effective Time.................................................. 12
Environmental Laws.............................................. 3
Environmental Permits........................................... 31
ERISA........................................................... 3
ERISA Affiliate................................................. 3
Exchange Act.................................................... 3
Exchange Agent.................................................. 13
Exchange Offer Consideration.................................... 3
Exchange Ratio.................................................. 7
GAAP............................................................ 21
Governmental Authority.......................................... 3
Hazardous Substances............................................ 3
HSR Act......................................................... 4
including....................................................... 61
Indebtedness.................................................... 4
Intellectual Property........................................... 32
IP Licenses..................................................... 33
knowledge....................................................... 61
iii
Page
----
Law............................................................. 4
Lien............................................................ 4
Liquidated Amount............................................... 55
material........................................................ 61
Merger.......................................................... 1
Merger Consideration............................................ 12
Merger Sub...................................................... 1
Minimum Condition............................................... 1
NASD............................................................ 4
NYSE............................................................ 5
Offer........................................................... 1
Offer Documents................................................. 8
Offer Registration Statement.................................... 8
Outside Date.................................................... 54
Parent.......................................................... 1
Parent Common Stock............................................. 1
Parent Material Adverse Effect.................................. 5
Parent SEC Documents............................................ 38
Patents......................................................... 33
Per Share Cash Consideration.................................... 7
Permits......................................................... 5
Permitted Liens................................................. 5
person.......................................................... 61
Preliminary Prospectus.......................................... 8
Proprietary Software............................................ 33
RCRA............................................................ 32
Recommendations................................................. 9
Release......................................................... 5
Representation Letters.......................................... 52
Representative.................................................. 5
Reverse Merger.................................................. 52
Rule 145 Affiliate.............................................. 5
Salary Continuation Agreements.................................. 49
Schedule 14D-9.................................................. 9
Schedule TO..................................................... 8
SEC............................................................. 5
Securities Act.................................................. 6
Shareholder Agreements.......................................... 1
Shareholders.................................................... 1
Skadden Arps.................................................... 52
Software........................................................ 33
Subsequent Determination........................................ 47
Subsequent Determination Notice................................. 47
subsidiary...................................................... 61
Superior Proposal............................................... 46
Surviving Corporation........................................... 11
Tax Opinion..................................................... 52
Tax Return...................................................... 6
Taxes........................................................... 6
Termination Damages............................................. 57
iv
Page
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Third Party..................................................... 6
Title IV Plan................................................... 24
Trade Secrets................................................... 33
Trademarks...................................................... 32
Transaction..................................................... 6
Treasury Regulations............................................ 29
Trigger Event................................................... 56
URBCA........................................................... 1
Voting Debt..................................................... 17
WARN Act........................................................ 27
v
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of October 15, 2001, by and among Motor Cargo Industries, Inc., a Utah
corporation (the "Company"), Union Pacific Corporation, a Utah corporation
("Parent"), and Motor Merger Co., a Utah corporation and wholly-owned
subsidiary of Parent ("Merger Sub").
WITNESSETH:
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub deem it advisable and in the best interests of their respective
shareholders that Parent engage in a strategic business combination with the
Company upon the terms and subject to the conditions provided for in this
Agreement;
WHEREAS, in furtherance thereof it is proposed that the acquisition be
accomplished by Parent commencing an offer (as it may be amended from time to
time as permitted by this Agreement, the "Offer") to exchange in which each of
the issued and outstanding shares of common stock, no par value, of the Company
(the "Company Shares"), upon the terms and subject to the conditions set forth
in this Agreement, may be exchanged for the right to receive from Parent, at
the election of the holder thereof: (A) 0.26 of a share of common stock, par
value $2.50 per share of Parent ("Parent Common Stock"), or (B) $12.10 in cash;
WHEREAS, the Board of Directors of each of Parent (on its own behalf and as
the sole shareholder of Merger Sub), Merger Sub and the Company have each
approved this Agreement and the merger of the Company with and into the Merger
Sub (the "Merger"), with the Merger Sub continuing as the surviving corporation
in the Merger in accordance with the Utah Revised Business Corporation Act
("URBCA") and upon the terms and conditions set forth in this Agreement;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Parent's willingness to enter into
this Agreement, Parent is entering into shareholder agreements with each of
Harold R. Tate and Marvin L. Friedland (together, the "Shareholders"), pursuant
to which, among other things, each Shareholder is agreeing to validly tender
for exchange all Company Shares owned by such Shareholder and elect to receive
Parent Common Stock as consideration for all of such shares (the "Shareholder
Agreements"); and
WHEREAS, the Board of Directors of the Company has unanimously approved the
Offer and the Merger, this Agreement and the transactions contemplated hereby
in a manner which constitutes a directors' action (as defined in Section
16-10a-852 of the URBCA), and has amended the Bylaws of the Company to provide
that Chapter 6 of Title 61 of the Utah Code does not apply to control share
acquisitions (as defined in Section 61-6-3 of the Utah Code) of capital stock
of the Company, and such approvals and amendment are sufficient to render
Section 61-6-10 of the Utah Code inapplicable to the Offer and the Merger, this
Agreement, the Shareholder Agreements and the transactions contemplated hereby
and thereby.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and in the Shareholder
Agreements, the adequacy of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions When used in this Agreement, the following terms
shall have the respective meanings specified therefor below (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined).
"Antitrust Laws" means, collectively, the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign statutes, rules, regulations,
orders or decrees that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
"Beneficial Owner" or "Beneficially Owning" shall have the meaning set forth
in Rule 13d-3 promulgated under the Exchange Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder.
"Company Material Adverse Effect" shall mean any fact, change, event or
effect that, individually or together with other facts, changes, events or
effects, is, or would reasonably be expected to be, materially adverse, in
either the short-term or long-term, to the business, operations, results of
operations, financial condition, assets or liabilities of the Company and its
subsidiaries, taken as a whole, whether related specifically to the Company or
to more generally applicable facts, changes, events or effects.
"Disclosure Schedule" means the disclosure schedule delivered by the Company
to Parent on or prior to the date hereof.
"Environmental Laws" shall mean all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of the
environment or human health and safety, including laws relating to releases or
threatened releases of Hazardous Substances into the indoor or outdoor
environment (including ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances; all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances; all laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources; and common
law to the extent it relates to or applies to exposure to or impact of
Hazardous Substances on persons or property.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any person, any trade or
business, whether or not incorpo-rated, that together with such person would be
deemed a "single employer" within the meaning of section 4001(b)(1) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Offer Consideration" means the shares of Parent Common Stock or
the cash (including cash in lieu of fractional shares) to be received upon
consummation of the Offer pursuant to the terms set forth in Section 2.1(a).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative
2
functions of or pertaining to government, including any governmental or
regulatory authority, agency, department, board, commission, administration or
instrumentality, any court, tribunal or arbitrator or any self regulatory
organization.
"Hazardous Substances" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls, and radon
gas; (b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous substances,"
"toxic substances," "contaminants" or "pollutants" or words of similar meaning
and regulatory effect; or (c) any other chemical, material or substance,
exposure to which is prohibited, limited, or regulated by any applicable
Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
the same has been or may be amended from time to time.
"Indebtedness" shall mean, with respect to any person, without duplication,
(a) all obligations of such person for borrowed money, or with respect to
deposits or advances of any kind to such person, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily paid,
(d) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (e) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such person's business), (f) all capitalized lease obligations of such person,
(g) all obligations of others secured by any Lien on property or assets owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed, (h) all obligations of such person under interest rate or
currency swap transactions (valued at the termination value thereof), (i) all
letters of credit issued for the account of such person (excluding letters of
credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business), (j) all obligations of
such person to purchase securities (or other property) which arises out of or
in connection with the sale of the same or substantially similar securities or
property, and (k) all guarantees and arrangements having the economic effect of
a guarantee of such person of any indebtedness of any other person.
"Law" means any federal, state, local, foreign or other statute, law,
ordinance, rule or regulation or any order, writ, decision, injunction,
judgment, award or decree.
"Lien" means any security interests, liens, claims, pledges, options, rights
of first refusal, agreements, charges or other encumbrances of any nature or
any other limitation or restriction (including any restriction on the right to
vote or sell the same, except as may be provided under applicable federal or
state securities laws).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange.
"Parent Material Adverse Effect" shall mean any fact, change, event or
effect that, individually or together with other facts, changes, events or
effects, is, or would reasonably be expected to be, materially adverse, in
either the short-term or long-term, to the business, operations, results of
operations, financial condition, assets or liabilities of Parent and its
subsidiaries, taken as a whole, whether related specifically to Parent or to
more generally applicable facts, changes, events or effects.
"Permits" means approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits, consents and rights.
3
"Permitted Liens" shall mean such of the following as to which neither the
Company nor any of its subsidiaries is otherwise subject to criminal liability
due to its existence: (i) Liens disclosed as such in the financial statements
of the Company SEC Documents, (ii) Liens for Taxes not yet due and payable or,
if due, (A) not delinquent or (B) being contested in good faith by appropriate
proceedings during which collection or enforcement against the property is
stayed, (iii) mechanics', workmen's, repairmen's, warehousemen's, carriers' or
other Liens, including statutory Liens, arising or incurred in the ordinary
course of business that do not materially interfere with or materially affect
the value or use of the respective underlying asset to which such Liens relate,
(iv) original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and (v)
Liens that do not materially interfere with or materially affect the value or
use in any material respect of the respective underlying asset to which such
Liens relate.
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Substances through or in the air, soil,
surface water, groundwater or property.
"Representative" means with respect to any person, its officers, directors,
employees, investment bankers, attorneys, accountants, consultants or other
agents, advisors or representatives.
"Rule 145 Affiliate" means an affiliate within the meaning of Rule 145
promulgated under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Taxes" shall mean (a) any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, occupation, use, service,
service use, license, net worth, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the Internal Revenue Service or any taxing
authority (whether domestic or foreign including any state, county, local or
foreign government or any subdivision or taxing agency thereof (including a
United States possession)), including any interest whether paid or received,
fines, penalties or additional amounts attributable to, or imposed upon, or
with respect to, any such taxes, charges, fees, levies or other assessments,
(b) liability for the payment of any amounts described in clause (a) above as a
result of being a member of an affiliated, consolidated, combined, unitary or
similar group or as a result of transferor or successor liability and (c)
liability for the payment of any amounts as a result of being a party to any
tax sharing agreement or as a result of any agreement to indemnify any other
person with respect to the payment of any amounts of the type described in
clause (a) or (b) above.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
"Third Party" means any person (or group of persons) other than Parent and
its respective subsidiaries.
"Transaction" means the combined series of transactions contemplated by this
Agreement, including the Offer and the Merger.
4
ARTICLE II
THE OFFER
Section 2.1. The Offer
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and that none of the events set forth in
paragraphs (a) through (l) of Annex A hereto shall have occurred or be existing
(and shall not have been waived by Parent), Parent shall commence (within the
meaning of Rule 14d - 2 promulgated under the Exchange Act) as promptly as
reasonably practicable after the date hereof the Offer to exchange for each
Company Share, at the election of the holder thereof, either: (i) 0.26 (the
"Exchange Ratio") of a share of Parent Common Stock; or (ii) cash in the amount
of $12.10 (the "Per Share Cash Consideration"). Shareholders who validly tender
Company Shares but fail to make an election shall be deemed to have elected to
receive the Per Share Cash Consideration for each share of Company Common Stock
validly tendered.
(b) The obligation of Parent to accept for payment and pay for Company
Shares tendered pursuant to the Offer in the form and amount specified in
Section 2.1 shall be subject only to the conditions set forth in Annex A
hereto; provided, however, no certificates or scrip representing fractional
shares of Parent Common Stock shall be issued in connection with the exchange
of Parent Common Stock for Company Shares upon consummation of the Offer, and
in lieu thereof each tendering shareholder who would otherwise be entitled to a
fractional share of Parent Common Stock in the Offer will be paid an amount in
cash equal to the product obtained by multiplying (A) the fractional share
interest of such holder (after taking into account all shares of Company Common
Stock validly tendered for exchange and not withdrawn by such holder) would
otherwise be entitled by (B) the closing price for a share of Parent Common
Stock as reported on the NYSE Composite Transaction Tape (as reported in the
Wall Street Journal, or, if not reported thereby, any other authoritative
source) on the date Parent accepts Company Shares for exchange in the Offer.
The Per Share Cash Consideration payable by Parent for each validly tendered
Company Share accepted for payment by Parent shall, subject to any required
withholding of Taxes, be net to the holder thereof in cash. The Company agrees
that no Company Shares held by the Company or any of its subsidiaries will be
tendered to Parent pursuant to the Offer. Parent expressly reserves the right
to waive any of such conditions, to increase the Exchange Offer Consideration
payable in the Offer and to make any other changes in the terms of the Offer;
provided, however, that no change may be made without the prior written consent
of the Company which (i) decreases the amount payable per Company Share
tendered pursuant to the Offer, (ii) reduces the maximum number of Company
Shares that may be exchanged in the Offer, or (iii) imposes conditions to the
Offer in addition to the conditions set forth in Annex A hereto.
(c) Subject to the terms of the Offer and this Agreement and the
satisfaction or earlier waiver of all the conditions of the Offer set forth in
Annex A hereto as of any expiration date of the Offer, Parent will accept for
exchange and pay for all Company Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the expiration of the Offer.
The initial expiration date of the Offer shall be the twentieth business day
following the commencement of the Offer. Parent may, without the consent of the
Company, extend the Offer (i) for one or more periods beyond the initial
expiration date but in no event ending later than January 31, 2002 if, at the
initial or extended expiration date of the Offer, any of the conditions to the
Offer set forth in Annex A hereto shall not have been satisfied or to the
extent permitted by this Agreement, waived, and (ii) for any period required by
any rule, regulation, interpretation or position of the SEC or the staff
thereof applicable to the Offer or any period required by applicable Law. In
addition, Parent may elect to provide a subsequent offering period for three
business days to twenty business days after the acceptance of Company Shares
pursuant to the Offer pursuant to Rule 14d - 11 promulgated under the Exchange
Act to meet the objective (which is not a condition to the Offer) that there be
validly tendered, in accordance with the terms of the Offer and such subsequent
offer, prior to the expiration date of such subsequent offer and not withdrawn
a number of Company Shares, which together with Company Shares then owned by
Parent, constitutes at least 90% of the then outstanding Company Shares.
5
(d) As promptly as practicable after the date of this Agreement, Parent
shall prepare and file with the SEC a registration statement on Form S-4
(together with any supplements or amendments thereto, the "Offer Registration
Statement") to register the offer and sale of Parent Common Stock pursuant to
the Offer. The Offer Registration Statement will include a preliminary
prospectus containing the information required under Rule 14d - 4(b)
promulgated under the Exchange Act (the "Preliminary Prospectus"). As soon as
practicable on the date of commencement of the Offer, Parent and Merger Sub
shall (i) file with the SEC a Tender Offer Statement on Schedule TO which will
contain or incorporate by reference all or part of the Preliminary Prospectus
and forms of the related letter of transmittal/election form and all other
ancillary documents with respect to the Offer (together with all supplements
and amendments thereto, the "Schedule TO") (the Schedule TO, the Offer
Registration Statement and such documents included therein pursuant to which
the Offer will be made, together with any supplements or amendments thereto,
the "Offer Documents") and (ii) cause the Offer Documents to be disseminated to
the holders of Company Shares. Each of the Company, Parent and Merger Sub
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect. Parent and Merger Sub agree to take all
steps necessary to cause the Schedule TO and the Offer Registration Statement
as so corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of Company Shares, in each case as and
to the extent required by applicable federal securities laws. The Company and
its counsel shall be given an opportunity to review and comment on the Offer
Documents prior to their being filed with the SEC or disseminated to the
holders of Company Shares. Each of Parent and Merger Sub agrees to provide the
Company and its counsel with any comments Parent and Merger Sub or their
counsel may receive from time to time from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments and to consult
with the Company and its counsel prior to responding to any such comments.
Section 2.2. Company Actions
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Company's Board of Directors, at a meeting duly called
and held, has (i) amended the Bylaws of the Company to provide that Chapter 6
of Title 61 of the Utah Code does not apply to control share acquisitions (as
defined in Section 61-6-3 of the Utah Code) of capital stock of the Company,
(ii) unanimously determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable and are
fair to and in the best interests of the shareholders of the Company, (iii)
unanimously approved and adopted this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, in a manner which
constitutes a directors' action (as defined in Section 16-10a-852 of the
URBCA), and (iv) unanimously resolved to recommend that the shareholders of the
Company accept the Offer, tender their Company Shares to Parent thereunder and
approve and adopt this Agreement and the Merger (the recommendations referred
to in this clause (iv) are collectively referred to in this Agreement as the
"Recommendations"). The Company hereby consents to the inclusion in the Offer
Documents of the Recommendations and approval of the Board of Directors
described in the immediately preceding sentence, and the Company shall not
permit the Recommendations and approval of the Company's Board of Directors or
any component thereof to be modified in any manner adverse to Parent or Merger
Sub or to be withdrawn by the Company's Board or any committee thereof, except
as provided, and only to the extent set forth, in Section 6.5 hereof.
(b) As promptly as practicable on the date of commencement of the Offer,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D - 9 (together with all amendments and supplements thereto, the
"Schedule 14D - 9") which shall contain the Recommendations which pertain to
this Agreement and the Offer. The Company further agrees to take all steps
necessary to cause the Schedule 14D - 9 to be disseminated to holders of
Company Shares as and to the extent required by applicable federal securities
laws. Each of the Company, Parent and Merger Sub will promptly correct any
information provided by it for use in the Schedule 14D - 9 if and to the extent
that it shall have become false or misleading in any material respect, and the
Company will cause the Schedule 14D - 9 as so corrected to be filed with the
SEC and to be disseminated to holders of Company Shares, in each case as and to
the extent required by applicable federal securities laws. Parent and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D - 9
6
before it is filed with the SEC. In addition, the Company agrees to provide
Parent, Merger Sub and their counsel with any comments that the Company or its
counsel may receive from time to time from the SEC or its staff with respect to
the Schedule 14D - 9 promptly after the receipt of such comments and to consult
with Parent, Merger Sub and their counsel prior to responding to any such
comments.
(c) The Company shall promptly furnish Parent with mailing labels
containing the names and addresses of all record holders of Company Shares and
with security position listings of Company Shares held in stock depositories,
each as of a recent date, together with all other available listings and
computer files containing names, addresses and security position listings of
record holders and non-objecting beneficial owners of Company Shares. The
Company shall furnish Parent with such additional information, including
updated listings and computer files of holders of Company Shares, mailing
labels and security position listings, and such other assistance as Parent or
its agents may reasonably request.
Section 2.3. Directors of the Company
(a) Effective upon the acceptance of Company Shares for payment by Parent
or any of its affiliates pursuant to the Offer, Parent shall be entitled to
designate such number of directors on the Board of Directors of the Company as
is equal to the product (rounded up to the next whole number) obtained by
multiplying the total number of directors on such Board at that time by the
percentage that the number of Company Shares then Beneficially Owned by Parent
(including such Company Shares so accepted) bears to the total number of
Company Shares then outstanding. In furtherance thereof, the Company and its
Board of Directors shall, after the acceptance of such Company Shares by Parent
or any of its affiliates pursuant to the Offer, upon written request of Parent,
immediately increase the size of its Board of Directors or secure the
resignations of such number of incumbent directors or remove such number of
incumbent directors (to the extent permitted by applicable Law), or any
combination of the foregoing, as is necessary to enable Parent's designees to
be so appointed to the Board of Directors of the Company and shall cause
Parent's designees to be so appointed. Effective upon the acceptance of Company
Shares by Parent or any of its affiliates pursuant to the Offer, the Company
shall, if requested by Parent, also cause directors designated by Parent to
constitute at least the same percentage (rounded up to the next whole number)
of each committee of the Company's Board of Directors as is on the Company's
Board of Directors after giving effect to the foregoing changes to the
composition of the Company's Board of Directors. Notwithstanding the foregoing,
there shall be until the Effective Time at least two members of the Company's
Board of Directors who are directors of the Company prior to consummation of
the Offer (each, a "Continuing Director"). The Company and its Board of
Directors shall promptly take all legally available actions as may be necessary
to comply with their obligations under this Section 2.3(a), including all
actions as may be permitted under the URBCA and the Company's Articles of
Incorporation and Bylaws.
(b) The Company shall comply with and immediately take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f - 1 promulgated
thereunder in order to fulfill its obligations under Section 2.3(a), including
mailing to shareholders, together with the Schedule 14D - 9, the information
required by such Section 14(f) and Rule 14f - 1 as is necessary to enable
Parent's designees to be appointed to the Company's Board of Directors. Parent
will supply the Company and be solely responsible for any information with
respect to Parent, its designees and its nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f - 1.
(c) Following the appointment of Parent's designees to the Company's Board
of Directors pursuant to this Section 2.3 and prior to the Effective Time, (i)
any amendment or termination of this Agreement by the Company, (ii) any
extension or waiver by the Company of the time for the performance of any of
the obligations or other acts of Parent or Merger Sub under this Agreement, or
(iii) any waiver of any of the Company's rights hereunder shall, in any such
case, require the concurrence of a majority of the Continuing Directors then in
office.
7
ARTICLE III
THE MERGER
Section 3.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, the Merger shall be consummated in accordance with the URBCA.
At the Effective Time, upon the terms and subject to the conditions of this
Agreement, the Company shall be merged with and into Merger Sub in accordance
with the URBCA and the separate existence of the Company shall thereupon cease,
and Merger Sub, as the surviving corporation in the Merger, shall continue its
corporate existence under the laws of the State of Utah as a wholly-owned
subsidiary of Parent; provided, however, that if Parent does not obtain a Tax
Opinion, then, in Parent's reasonable discretion, the Reverse Merger may be
effected, and the surviving corporation shall thereby become a wholly-owned
subsidiary of Parent. If the Reverse Merger is effected, then the separate
existence of Merger Sub shall cease and the Company shall become the surviving
corporation. The surviving corporation of the Merger or the Reverse Merger, as
the case may be, shall be herein referred to as the "Surviving Corporation." In
the event Parent elects to effect a Reverse Merger, all references to "Merger"
in this Agreement and all other ancillary or related agreements, documents and
instruments shall be deemed to be references to the "Reverse Merger" and this
Agreement and such other ancillary and related agreements, documents and
instruments shall be construed and interpreted accordingly.
Section 3.2. The Closing; Effective Time.
.
(a) The closing of the Merger (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New
York, New York 10036 at 10:00 a.m. local time as promptly as practicable, on a
date to be specified by the parties which shall be no later than the third
business day after the date that all of the closing conditions set forth in
Article VII have been satisfied or waived (if waivable) unless another time,
date and place is agreed upon in writing by the parties hereto.
(b) Effective Time. Subject to the provisions of this Agreement, on the
Closing Date the Surviving Corporation shall deliver to the Utah Department of
Commerce, Division of Corporations and Commercial Code, for filing articles of
merger in accordance with Section 16-10a-1105 of the URBCA (the "Articles of
Merger") executed in accordance with the relevant provisions of the URBCA and
shall make all other filings or recordings required under the URBCA in order to
effect the Merger. The Merger shall become effective upon the filing of the
Articles of Merger or at such other later time as is agreed by the parties
hereto and specified in the Articles of Merger in the manner required by the
URBCA. The time when the Merger shall become effective is herein referred to as
the "Effective Time" and the date on which the Effective Time occurs is herein
referred to as the "Closing Date."
Section 3.3. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any securities
of Merger Sub or the Company:
(a) Each Company Share that is owned by Parent, the Company or any of their
respective subsidiaries shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding Company Share (other than Company Shares to
be cancelled in accordance with Section 3.3(a) hereof and Dissenting Shares)
shall automatically be converted into the right to receive the Per Share Cash
Consideration in cash (the "Merger Consideration"), payable, without interest,
to the holder of such Company Share upon surrender, in the manner provided in
Section 3.4 hereof, of the certificate that formerly evidenced such Company
Share. All such Company Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Company Shares
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such
certificate in accordance with Section 3.4 hereof.
8
(c) Each issued and outstanding share of common stock of Merger Sub shall
remain outstanding and be one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
Section 3.4. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company reasonably acceptable to the Company to act as agent for
the holders of Company Shares (other than Company Shares held by Parent, the
Company and any of their respective subsidiaries and Dissenting Shares) in
connection with the Merger (the "Exchange Agent") to receive in trust, the
aggregate Merger Consideration to which holders of Company Shares shall become
entitled pursuant to Section 3.3(b) hereof. Parent shall deposit such aggregate
Merger Consideration with the Exchange Agent promptly following the Effective
Time. Such aggregate Merger Consideration shall be invested by the Exchange
Agent as directed by Parent. Any interest and other income resulting from such
investment shall be paid to Parent.
(b) Exchange Procedures. Promptly after the Effective Time, Parent and the
Surviving Corporation shall cause to be mailed to each holder of record, as of
the Effective Time, of a certificate or certificates, which immediately prior
to the Effective Time represented outstanding Company Shares (the
"Certificates"), whose Company Shares were converted pursuant to Section 3.3(b)
hereof into the right to receive the Merger Consideration, a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancella-tion to the
Exchange Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, properly completed and duly executed
in accordance with the instructions thereto, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each Company Share formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash payable upon the surrender of the Certificates.
Until surrendered as contemplated by this Section 3.4, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration for each Company Share in cash as contemplated
by Section 3.3(b) hereof.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the Company
Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of the Company Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Company Shares, except as otherwise provided for herein or by
applicable law. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article III.
(d) Termination of Fund; No Liability. At any time following the one-year
anniversary of the Effective Time, the Surviving Corporation shall be entitled
to require the Exchange Agent to deliver to it any funds (including any
interest received with respect thereto) which had been made available to the
Exchange Agent, and holders of Company Shares not theretofore exchanged for the
Merger Consideration shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Exchange Agent nor any
party hereto shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate(s) to be lost, stolen or
destroyed and, if required by Parent, the posting by such person of a bond in
such sum as Parent may
9
reasonably direct as indemnity against any claim that may be made against any
party hereto or the Surviving Corporation with respect to such Certificate(s),
the Exchange Agent will issue the Merger Consideration pursuant to Section
3.3(b) deliverable in respect of the Shares represented by such lost, stolen or
destroyed Certificates.
(f) Withholding Taxes. Parent and Merger Sub shall be entitled to deduct
and withhold, or cause the Exchange Agent to deduct and withhold, from the
Exchange Offer Consideration or the Merger Consideration payable to a holder of
Company Shares pursuant to the Offer or the Merger, or from the cash payments
provided for in Section 3.5 of this Agreement, any such amounts as are required
under the Code, or any applicable provision of state, local or foreign Tax law.
To the extent that amounts are so withheld by Parent or Merger Sub, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Company Shares or Company Options in respect of
which such deduction and withholding was made by Parent or Merger Sub.
(g) Transfer Taxes. If payment of the Exchange Offer Consideration or the
Merger Consideration payable to a holder of Company Shares pursuant to the
Offer or the Merger is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other Taxes required by reason of the
issuance to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of Parent that such
Tax either has been paid or is not applicable.
Section 3.5. Options. Parent acknowledges that in connection with the
transactions contemplated hereby, each Company Option granted to an employee,
officer or director of the Company under the Company Plans shall become fully
vested and exercisable in accordance with the Company Plans. At the Effective
Time, each such then-outstanding Company Option shall be cancelled and the
holder thereof shall be entitled to receive as consideration for such
cancellation, an amount in cash (net of applicable withholdings) equal to the
excess of (i) the Per Share Cash Consideration over (ii) the per share exercise
or strike price of such Company Option multiplied by (iii) the number of shares
subject to such Company Option.
Section 3.6. Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, each outstanding Company Share, the holder of which
has demanded and perfected such holder's right to dissent from the Merger and
to be paid the fair value of such Company Shares in accordance with Part 13 of
the URBCA and, as of the Effective Time, has not effectively withdrawn or lost
such dissenters' rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration into which Company Shares
are converted pursuant to Section 3.3(b) hereof, but the holder thereof shall
be entitled only to such rights as are granted by the URBCA. Notwithstanding
the immediately preceding sentence, if any holder of Company Shares who demands
dissenters' rights with respect to its Shares under the URBCA effectively
withdraws or loses (through failure to perfect or otherwise) its dissenters'
rights, then as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Company Shares will automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 3.3(b) hereof, without interest thereon, upon surrender
of the certificate or certificates formerly representing such Company Shares.
After the Effective Time, Parent shall cause the Surviving Corporation to make
all payments to holders of Company Shares with respect to such demands in
accordance with the URBCA. The Company shall give Parent (i) prompt written
notice of any notice of intent to demand fair value for any Company Shares,
withdrawals of such notices, and any other instruments served pursuant to the
URBCA and received by the Company, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for fair value for Company
Shares under the URBCA. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any such
demands for fair value for Company Shares or offer to settle or settle any such
demands.
Section 3.7. Articles of Incorporation and Bylaws. Subject to Section 6.12
hereof, at and after the Effective Time until the same have been duly amended,
(i) the Articles of Incorporation of the Surviving Corporation shall be in the
form set forth in Exhibit A hereto and (ii) the Bylaws of the Surviving
Corporation shall be identical to the Bylaws of Merger Sub
10
Section 3.8. Directors and Officers. At and after the Effective Time, the
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, in each case until their successors are elected or appointed and
qualified. If, at the Effective Time, a vacancy shall exist on the Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law.
Section 3.9. Other Effects of Merger. The Merger shall have all further
effects as specified in the applicable provisions of the URBCA.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Company hereby represents and warrants to Parent and Merger Sub as follows:
Section 4.1. Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of the Company and its subsidiaries has the requisite corporate power and
corporate authority and any necessary material governmental authority,
franchise, license, certificate or permit to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures to be
so qualified and in good standing which are not, or would not be reasonably
expected to be, material to the Company. Exhibit 21 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 sets forth (by
incorporation by reference) a complete list of the Company's active
subsidiaries. The Company's inactive subsidiaries have no operations or
liabilities.
Section 4.2. Capitalization. (a) The authorized capital stock of the
Company consists of (A) 100,000,000 shares of common stock, no par value, of
which, as of the date hereof, 6,473,140 shares are issued and outstanding and
(B) 25,000,000 shares of preferred stock, no par value, of which, as of the
date hereof, none are issued and outstanding. As of the date hereof, there are
no treasury shares of the Company and only options (the "Company Options") to
purchase in the aggregate 350,400 Company Shares are outstanding all of which
were granted under either the Company's 1997 Stock Option Plan or the Company's
1999 Stock Option Plan for Non-Employee Directors (the "Company Plans"). All
the outstanding shares of the Company's capital stock are, and all shares which
may be issued pursuant to the exercise of outstanding Company Options or
pursuant to the Company Plans will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its subsidiaries issued and
outstanding. Except as set forth above and except for the transactions provided
for in this Agreement, as of the date hereof, (i) there are no shares of
capital stock of the Company authorized, issued or outstanding and (ii) there
are no existing options, warrants, calls, pre-emptive rights, subscriptions or
other rights, convertible securities, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of the
Company or any of its subsidiaries, obligating the Company or any of its
subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of its subsidiaries or securities convertible into or
exchangeable for such shares or equity interests or obligations of the Company
or any of its subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, convertible security, agreement,
arrangement or commitment. There are no outstanding contractual obligations of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any Company Shares or other capital stock of the Company or any of its
subsidiaries or affiliates of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any of
its subsidiaries or any other entity nor has the Company or any of its
subsidiaries granted or agreed to grant to any person any stock appreciation
rights or
11
similar equity-based rights. Except as permitted by this Agreement, following
the Merger, neither the Company nor any of its subsidiaries will have any
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
(b) All of the outstanding shares of capital stock of each of the
subsidiaries are owned beneficially by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its subsidiaries free and clear
of all Liens.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its subsidiaries. None of
the Company or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
Section 4.3. Corporate Authorization; Validity of Agreement; Company
Action. The Company has the requisite corporate power and corporate authority
to enter into this Agreement, to perform its obligations hereunder and, subject
to obtaining the Company Shareholder Approval (unless, pursuant to the URBCA,
such approval is not required to effectuate the Merger) with respect to the
Merger, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, if required by the URBCA, to obtaining the
Company Shareholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of Parent and the Merger Sub, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and by
general equitable principles.
(a) The affirmative vote of the holders (including Parent following its
acceptance of Company Shares for payment under the Offer) of a majority of the
outstanding Company Shares (the "Company Shareholder Approval") is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger and the transactions contemplated hereby (other
than the Offer and the Shareholder Agreements and the transactions contemplated
thereby, in respect of which no approval is required from the holders of
capital stock of the Company) unless, pursuant to the URBCA, such approval is
not required to effectuate the Merger.
(b) Neither the Company nor any of its subsidiaries Beneficially Owns,
either directly or indirectly, any shares of capital stock of the Company.
(c) The Company has duly and validly approved and taken all actions
required to be taken by the Company's Board of Directors under the URBCA to
approve the Offer, the Merger and the other transactions contemplated by this
Agreement. The Bylaws of the Company have been duly amended and adopted to
provide that Chapter 6 of Title 61 of the Utah Code does not apply to control
share acquisitions (as defined in Section 61-6-3 of the Utah Code) of capital
stock of the Company. The Company has furnished to Parent a certified copy of
resolutions of the Board of Directors of the Company (i) approving this
Agreement, the Offer, the Merger and the other transactions contemplated
hereby, (ii) effecting the amendment to the Bylaws of the Company described in
the second sentence of this Section 4.3(c) and (iii) providing that all Company
Options outstanding as of the Effective Time will be cancelled at the Effective
Time and that holders of such cancelled Company Options shall be entitled to
receive an amount of cash as consideration for such cancellation in accordance
with Section 3.5 hereof. The approvals and determinations and Bylaw amendment
described in this Section and Section 2.2 hereof are (i) sufficient to render
Section 61-6-10 of the Utah Code inapplicable to the Offer, the Merger, this
Agreement, the Shareholder Agreements and the other transactions contemplated
hereby and thereby and (ii) in accordance with Section 16-10a-1103 of the
URBCA. No "fair price," "merger moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation applies or purports to apply
to this Agreement, the Offer or the Merger, the Shareholder Agreements or the
other transactions contemplated hereby and thereby.
12
(d) Prior to any action being taken by the Board of Directors of the
Company with respect to the approval and adoption of this Agreement and the
transactions contemplated hereby, the qualified directors of the Company (as
defined in Section 16-10a-850 of the URBCA) received the required disclosure
(as defined in Section 16-10a-850 of the URBCA), including disclosure of the
existence and nature of this Agreement, the Shareholder Agreements and the
transactions contemplated hereby and thereby, by each director who has a
conflicting interest (as defined in Section 16-10a-850 of the URBCA) with
respect to the approval and adoption of this Agreement and the transactions
contemplated hereby. All facts known to such directors with conflicting
interests in respect of the subject matter of such transactions that an
ordinarily prudent person would reasonably believe to be material to a judgment
about whether or not to proceed with the transactions were disclosed. The
action of the Company's Board of Directors described in Section 2.2 hereof
constitute a directors' action (as defined in Section 16-10a-852 of the URBCA)
with respect to this Agreement, the Shareholder Agreements and the transactions
contemplated hereby and thereby.
Section 4.4. Consents and Approvals; No Violations. Except as disclosed in
Section 4.4 of the Disclosure Schedule and for filings and other Permits, as
may be required under, and other applicable requirements of, the Exchange Act,
the approval of this Agreement and the Merger by the Company's shareholders and
the filing and recordation of the Articles of Merger as required by the URBCA,
neither the execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the articles of incorporation
or bylaws or similar organizational documents of the Company or of any of its
subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any
Company Agreement or (iii) violate any Law applicable to the Company, any of
its subsidiaries or any of their properties or assets, except in the case of
(ii) or (iii) for such violations, breaches or defaults which do not have, and
would not reasonably be expected to have, a Company Material Adverse Effect and
which will not materially impair the ability of the Company to consummate, or
prevent or materially delay the consummation of, the transactions contemplated
hereby.
(a) No consent, approval, waiver or authorization of, notice to,
declaration by, or filing with ("Consent") a Governmental Authority is required
by or with respect to the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated by this Agreement, except for
(i) the filing of a premerger notification and report form by the Company under
the HSR Act, and any applicable filings under other Antitrust Laws, (ii) the
filing with the SEC of (A) the Schedule 14D-9 and the information required by
Rule 14f-1, (B) the Proxy Statement, and (C) such reports under the Exchange
Act and the Securities Act, as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) such filings as may
be required under state securities or "blue sky" laws, (iv) the filing of the
Articles of Merger with the Utah Department of Commerce, Division of
Corporations and Commercial Code, and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (v) such other consents, approvals, orders, authorizations, registrations,
declarations and filings, the failure of which to be made or obtained, do not
have, and would not reasonably be expected to have, a Company Material Adverse
Effect, and which will not materially impair the ability of the Company to
consummate, or to prevent or materially delay the consummation of, the
transactions contemplated hereby.
Section 4.5. SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed or furnished by it and its subsidiaries since December 31,
1998 under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including any financial
statements or schedules included therein (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they
13
were made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. Each of
the consolidated financial statements included in the Company SEC Documents
have been prepared from, and are in accordance with, the books and records of
the Company and its consolidated subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position and
the consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated subsidiaries as at the
dates thereof or for the periods presented therein. The financial results set
forth in the financial statements and schedules set forth in the Company's Form
10-Q for the quarterly period ended September 30, 2001 shall be no less
favorable than the results furnished in writing by the Company to Parent as of
the date hereof.
Section 4.6. Absence of Certain Changes. Except as disclosed in Section
4.6 of the Disclosure Schedule, since December 31, 2000, the Company and its
subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course thereof and
there has not occurred (i) any events, changes, or effects (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) which have, or would reasonably be expected to have, a Company
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of the Company or of any of its subsidiaries
other than dividends paid by wholly-owned subsidiaries; or (iii) any change by
the Company or any of its subsidiaries in accounting principles or methods,
except insofar as may be required by a change in GAAP. Since December 31, 2000,
neither the Company nor any of its subsidiaries has taken any of the actions
prohibited by Section 6.1 hereof.
Section 4.7. No Undisclosed Liabilities. Except (a) to the extent
disclosed in Section 4.7 of the Disclosure Schedule and (b) for liabilities and
obligations incurred in the ordinary and customary course of business and
consistent with past practice, since December 31, 2000, neither the Company nor
any of its subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, which have, or would
reasonably be expected to have, a Company Material Adverse Effect, or would be
required to be reflected or reserved against on a consolidated balance sheet of
the Company and its subsidiaries (including the notes thereto) prepared in
accordance with GAAP as applied in preparing the consolidated balance sheet of
the Company and its subsidiaries as of December 31, 2000. Section 4.7 of the
Disclosure Schedule sets forth the amount of principal and unpaid interest
outstanding under each instrument evidencing Indebtedness of the Company and
its subsidiaries which will accelerate or become due or result in a right of
redemption or repurchase on the part of the holder of such Indebtedness (with
or without due notice or lapse of time) as a result of this Agreement, the
Merger or the other transactions contemplated hereby.
Section 4.8. Schedule 14D-9; Proxy Statement. Neither the Schedule 14D-9,
nor any of the information supplied or to be supplied by the Company or its
subsidiaries or representatives for inclusion or incorporation by reference in
the Offer Registration Statement or the Offer Documents will, at the respective
times any such documents or any amendments or supplements thereto are filed
with the SEC, are first published, sent or given to shareholders of the Company
or become effective under the Securities Act, 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. The Proxy Statement
will not, at the time the Proxy Statement is mailed to the Company's
shareholders or, at the time of the Company Shareholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Schedule 14D-9 and the Proxy Statement will comply as to form in all material
respects with the requirements of all applicable Laws, including the Exchange
Act and the rules and regulations thereunder. No representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information
14
supplied by Parent or Merger Sub specifically for inclusion or incorporation by
reference therein. The Company represents that it has obtained all necessary
consents to permit the inclusion in its entirety of the fairness opinion of
Morgan Keegan & Company, Inc. in the Schedule 14D-9 and, if necessary, the
Proxy Statement.
Section 4.9. Employee Benefit Plans; ERISA
(a) There have been, since January 1, 1995, no employee benefit plans,
programs, arrangements, contracts or agreements (including pension, health,
life insurance, cash-or equity-based incentive, deferred compensation, stock
purchase or restricted stock plans or agreements and employment, change of
control and severance plans or agreements) of any type (including plans
described in section 3(3) of ERISA), maintained, contributed to or required to
be contributed to, or entered into by the Company, any of its subsidiaries or
any of their respective ERISA Affiliates, or with respect to which the Company
or any of its subsidiaries has, may have, or may have had, a liability, other
than those disclosed in Section 4.9 of the Disclosure Schedule (the "Benefit
Plans"). Except as set forth in documents delivered to Parent in accordance
with Section 4.9(h), there have been no amendments to any Benefit Plan
resulting in an increase of costs to the Company or any ERISA Affiliate of the
Company and/or an increase of benefits provided under such Benefit Plan to any
current or former employee of the Company or any of its subsidiaries. Neither
the Company nor any ERISA Affiliate of the Company has any formal plan or
commitment, whether legally binding or not, to create any additional Benefit
Plan or modify or change any existing Benefit Plan that would affect any
current or former employee of the Company or any of its subsidiaries.
(b) With respect to each Benefit Plan: (i) if intended to qualify under
section 401(a) of the Code, such plan so qualifies, and its trust is exempt
from taxation under section 501(a) of the Code and no condition exists that
could adversely affect such qualification or tax exemption, except for
amendments that must be made to such plan for which the remedial amendment
period is still open; (ii) such plan has been administered in all material
respects in accordance with its terms and applicable Law; (iii) no breaches of
fiduciary duty have occurred which might be expected to give rise to a material
liability on the part of the Company or any ERISA Affiliate of the Company;
(iv) no disputes are pending, threatened or, to the knowledge of the Company,
anticipated that might be expected to give rise to a material liability on the
part of the Company or any ERISA Affiliate of the Company; (v) no prohibited
transaction (within the meaning of section 406 or 407 of ERISA) has occurred
that might be expected to give rise to a material liability on the part of the
Company or any ERISA Affiliate of the Company; (vi) all contributions and
premiums due as of the date hereof (including any extensions for such
contributions and premiums) have been made in full; (vii) no Tax has been
imposed under section 4976, 4977, 4978, 4979, 4980 or 5000 of the Code; and
(viii) all relevant reports and other filings (including form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) have been timely
made. Section 4.9(b) of the Disclosure Schedule sets forth, to the knowledge of
the Company, a description of each failure to administer any Benefit Plan
intended to be qualified under Section 401(a) of the Code in accordance with
its terms and applicable Law which occurred after January 1, 1995.
(c) Full payment has been made, or will be made in accordance with section
404(a)(6) of the Code, of all amounts which the Company or any ERISA Affiliate
of the Company is required to pay under the terms of each of the Benefit Plans
as of the last day of the most recent plan year thereof ended prior to the date
of this Agreement, and all such amounts which become due through the Effective
Time will be satisfied by the Company or its ERISA Affiliates at or prior to
the Effective Time.
(d) With respect to each Benefit Plan that is, or has been since January 1,
1995, subject to section 302 or Title IV of ERISA (each such plan, a "Title IV
Plan") (i) neither the Company nor any ERISA Affiliate of the Company has
incurred any liability under Title IV of ERISA that has not been satisfied in
full; (ii) the Pension Benefits Guaranty Corporation has not instituted
proceedings to terminate any such plan and no condition exists that presents a
material risk that such proceedings will be instituted, (iii) the present value
of accrued benefits under such plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial
15
report prepared by such plan's actuary with respect to such plan did not
exceed, as of its latest valuation date, the then current value of the assets
of such plan allocable to such accrued benefits; and (iv) no such plan or any
trust established thereunder has incurred any "accumulated funding deficiency"
(as defined in section 302 of ERISA and section 412 of the Code), whether or
not waived, as of the last day of the most recent fiscal year of each Title IV
Plan ended prior to the Closing Date. With respect to clauses (i)-(iv) of this
Section 4.9(d), insofar as such representations apply to section 4064, 4069 or
4204 of ERISA, they are made with respect to any Title IV Plan to which the
Company or any ERISA Affiliate of the Company made, or was required to make,
contributions during the period commencing January 1, 1995 and ending on the
last day of the most recent plan year ended prior to the Closing Date.
(e) With respect to each Benefit Plan that is a "welfare plan" (as defined
in section 3(1) of ERISA), no such plan provides medical or death benefits with
respect to current or former employees of the Company or any of its
subsidiaries beyond their termination of employment, other than (i) coverage
mandated by applicable Law; (ii) death benefits under any "pension plan"; or
(iii) benefits the full cost of which is now, and shall be in the future, borne
by the current or former employee (or his beneficiary). No condition exists
that would prevent the Company or any of its subsidiaries from amending or
terminating any Benefit Plan providing health or medical benefits in respect of
any active or former employee of the Company or any subsidiaries other than
limitations imposed under the terms of collective bargaining agreements. There
has been no material failure of a Benefit Plan that is a group health plan (as
defined in section 5000(b)(1) of the Code) to meet the requirements of
section 4980B(f) of the Code with respect to a qualified beneficiary (as
defined in section 4980B(g) of the Code).
(f) The consummation of the transactions contemplated by this Agreement
will not, alone or in combination with a related event, (i) entitle any
individual to severance pay or accelerate the time of payment or vesting, or
increase the amount, of compensation or benefits due to any individual; (ii)
constitute or result in a prohibited transaction under section 4975 of the Code
or section 406 or 407 of ERISA; or (iii) subject the Company, any of its
subsidiaries, any ERISA Affiliate of the Company, any of the Benefit Plans, any
related trust, any trustee or administrator thereof, or any party dealing with
the Benefit Plans or any such trust to either a civil penalty assessed pursuant
to section 409 or 502(i) of ERISA or a tax imposed pursuant to section 4976 or
4980B of the Code.
(g) Except as set forth in Section 4.9(g) of the Disclosure Schedule, there
is no Benefit Plan that is a "multiemployer plan," as such term is defined in
Section 3(37) of ERISA, or a "multiple employer welfare arrangement," as such
term is defined in Section 3(40) of ERISA. Except for contributions required to
be made in the ordinary course to the plans set forth in Section 4.9(g) of the
Disclosure Schedule pursuant to the relevant collective bargaining agreements,
no additional costs would be incurred by Parent, the Company, the Surviving
Corporation or any of their respective ERISA Affiliates in connection with the
withdrawal from such plans by Parent, the Company, the Surviving Corporation,
any other employer under such plans or any of their respective ERISA
Affiliates. None of the Benefit Plans set forth in Section 4.9(g) of the
Disclosure Schedule is a "pension plan" as such term is defined in Section 3(2)
of ERISA.
(h) With respect to each Benefit Plan, the Company has delivered to Parent
accurate and complete copies of all plan texts, summary plan descriptions,
summaries of material modifications, trust agreements and other related
agreements including all amendments to the foregoing; the two most recent
annual reports; the most recent annual and periodic accounting of plan assets;
the most recent determination letter received from the United States Internal
Revenue Service; and the two most recent actuarial reports (including all
attachments), to the extent any of the foregoing may be applicable to a
particular Benefit Plan.
Section 4.10. Labor Matters.
(a) Except as specifically set forth in Section 4.10 of the Disclosure
Schedule, (i) neither the Company nor any of the subsidiaries is party to any
collective bargaining or other agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee
association applicable to employees
16
of the Company or any of its subsidiaries; (ii) to the knowledge of the
Company, no union claims to represent the employees of the Company or any of
its subsidiaries; (iii) none of the employees of the Company or any of its
subsidiaries is represented by any labor organization and the Company has no
knowledge of any current union organizing activities among the employees of the
Company or any of its subsidiaries, nor, to the knowledge of the Company, does
any question concerning representation exist concerning such employees; and
(iv) there are no written personnel policies, rules or procedures applicable to
employees of the Company or any of its subsidiaries. There is no labor strike,
dispute, slowdown, stoppage or lockout actually pending or, to the knowledge of
the Company, threatened against or affecting the respective business activities
of the Company or any of its subsidiaries and during the past five years there
has not been any such action. There is no unfair labor practice charge or
complaint against the Company or any of its subsidiaries pending or, to the
knowledge of the Company, threatened before the National Labor Relations Board
or any similar state or foreign agency. To the knowledge of the Company, no
charges with respect to or relating to the Company or any of its subsidiaries
are pending before the Equal Employment Opportunity Commission or any other
Governmental Authorities responsible for the prevention of unlawful employment
practices or any Governmental Authorities responsible for the enforcement of
employee health and safety (including under the Occupational Safety and Health
Act and the regulations thereunder). The Company has not received written
notice, or to the knowledge of the Company any verbal notice, of the intent of
any federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws or employee health and safety laws to conduct an
investigation with respect to or relating to the Company or any of its
subsidiaries and, to the knowledge of the Company, no such investigation is in
progress. There are no complaints, lawsuits or other proceedings pending or, to
the knowledge of the Company, threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries, any
applicant for employment or classes of the foregoing alleging any breach by the
Company or any of its subsidiaries of any express or implied contract of
employment, any laws governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship or any employee health and safety laws.
(b) The Company and each of its subsidiaries has paid in full, or fully
accrued for in the financial statements of the Company, all wages, salaries,
commissions, bonuses, severance payments, vacation payments, holiday pay, sick
pay, pay in lieu of compensatory time and other compensation due or to become
due to all current and former employees of the Company and each of its
subsidiaries for all services performed by any of them on or prior to the date
hereof. The Company and each of its subsidiaries has withheld and paid in a
timely manner all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee or independent contractor. The
Company and each of its subsidiaries are, and at all times have been, in all
material respects, in compliance with all applicable federal, state and local
and foreign laws, rules and regulations relating to the employment of labor
including laws, rules and regulations relating to payment of wages, employment
and employment practices, terms and conditions of employment, hours,
immigration, equal employment opportunity, discrimination, child labor,
occupational health and safety, collective bargaining and the payment and
withholding of taxes and other sums required by Governmental Authorities. To
the knowledge of the Company, the Company and its subsidiaries are not engaged
in any unfair labor practices as defined in the National Labor Relations Act or
other applicable law or regulation, and there is no grievance pending or, to
the knowledge of the Company, threatened which arises out of any collective
bargaining agreement or other grievance procedure.
(c) Except as set forth in Section 4.10(c) of the Disclosure Schedule,
since the enactment of the Worker Adjustment and Retraining Notification Act
(the "WARN Act"), neither the Company nor any of its subsidiaries has
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Company or any of its
subsidiaries; or (ii) a "mass-layoff" (as defined in the WARN Act) affecting
any site of employment or facility of the Company or any of its subsidiaries;
nor has the Company or any of its subsidiaries effected any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign law or regulation. Except as
disclosed in Section 4.10(c) of the Disclosure Schedule, none of the employees
of the
17
Company or any of its subsidiaries has suffered an "employment loss" (as
defined in the WARN Act) during the six month period prior to the date of this
Agreement. The listing in Section 4.10(c) of the Disclosure Schedule shall be
updated at the Closing Date for employment losses occurring during the 90 day
period prior to the Closing Date.
Section 4.11. Litigation; Compliance with Law.
(a) Except as disclosed in Section 4.11 of the Disclosure Schedule, there
is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting, the Company or any
of its subsidiaries which has, or would reasonably be expected to have, a
Company Material Adverse Effect, or materially impair the ability of the
Company to consummate or prevent or materially delay the consummation of, the
transactions contemplated hereby.
(b) The Company and its subsidiaries have complied in a timely manner and
in all material respects, with all Laws of any Governmental Authority relating
to any of the property owned, leased or used by them, or applicable to their
business, including but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, interstate
commerce and antitrust laws. The Company's and its subsidiaries' assets and
properties (in each case, tangible and intangible) have been operated and
maintained, in all material respects, in accordance with the Rules and
Regulations of the U.S. Department of Federal Highway Act and the Rules and
Regulations of the U.S. Department of Transportation, as applicable.
Section 4.12. Taxes (a) Except as set forth in Section 4.12 of the
Disclosure Schedule:
(i) the Company and its subsidiaries and each affiliated, combined,
consolidated or unitary group of which the Company or any of its
subsidiaries is or has been a member (a "Company Group") have (x) duly and
timely filed (or there have been filed on their behalf) with the appropriate
Governmental Authorities all Tax Returns required to be filed by them on or
prior to the date hereof, and such Tax Returns are true, correct and
complete, and (y) duly paid in full, or made provision in accordance with
GAAP (or there has been paid or provision has been made on their behalf) for
the payment of, all Taxes for all periods ending through the date hereof;
(ii) there are no Liens for Taxes upon any property or assets of the
Company or any of its subsidiaries, except for Liens for Taxes not yet due
and payable;
(iii) the Company and its subsidiaries have complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign laws) and
have, within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper Governmental Authorities all
amounts required to be so withheld and paid over under applicable laws;
(iv) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or its subsidiaries or any Company Group
and neither the Company nor any of its subsidiaries has received notice of
any pending audits or proceedings with regard to any Taxes or Tax Returns of
the Company or its Subsidiaries or any Company Group;
(v) the federal income Tax Returns of the Company and its subsidiaries
and any Company Group have been examined by the Internal Revenue Service (or
the applicable statutes of limitation for the assessment of federal income
Taxes for such periods have expired) for all periods through and including
December 31, 1997, and no material deficiencies were asserted as a result of
such examinations which have not been resolved and fully paid;
18
(vi) neither the Company nor any of its subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code;
(vii) neither the Company nor any of its subsidiaries has made any
change in Tax accounting methods since January 1, 1990;
(viii) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
subsidiaries, and no power of attorney granted by either the Company or any
of its subsidiaries with respect to any Taxes is currently in force;
(ix) neither the Company nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes;
(x) neither the Company nor any of its subsidiaries has, with regard to
any assets or property held, acquired or to be acquired by any of them,
filed a consent to the application of Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company or any of its subsidiaries; and
(xi) all transactions that could give rise to an understatement of the
federal income tax liability of the Company or any of its subsidiaries
within the meaning of Section 6662(d) of the Code are adequately disclosed
on Tax Returns in accordance with Section 6662(d)(2)(B) of the Code if there
is or was no substantial authority for the treatment giving rise to such
understatement.
(b) No excess loss accounts exist as described in Section 1.1502-19 of the
regulations promulgated under the Code (the "Treasury Regulations") with
respect to the Company or its subsidiaries.
(c) There are no net operating loss carryovers available to the Company or
its subsidiaries.
(d) Neither the Company nor any of its subsidiaries has taken or agreed to
take any action or knows of any fact, circumstance, plan or intention that
will, or would be reasonably likely to, prevent the Transaction from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.13. Contracts. Except as disclosed in Section 4.13 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding (whether
written or oral), (a) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (b) (1) which is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or (2) which
involves expenditures in excess of $100,000, (c) which contains any non-compete
or exclusivity provisions with respect to any material line of business or
material geographic area with respect to the Company or any of its
subsidiaries, or which restricts the conduct of any material line of business
by the Company or any of its subsidiaries or any material geographic area in
which the Company or any of its subsidiaries may conduct business, in each case
in any material respect or (d) which would prohibit or materially delay the
consummation of the Offer, the Merger or any of the transactions contemplated
in this Agreement. The Company has previously made available to Parent true and
complete copies of all (A) material agreements with customers and suppliers
listed in Section 4.13 of the Disclosure Schedule to which the Company or any
of its subsidiaries is a party and (B) employment and deferred compensation
agreements with directors, executive officers and key employees, and material
agreements with consultants, which are in writing and to which the Company or
any of its subsidiaries is a party. Each contract, arrangement,
19
commitment or understanding of the type described in this Section 4.13, whether
or not set forth in Section 4.13 of the Disclosure Schedule, is referred to
herein as a "Company Agreement." Each Company Agreement is valid and binding on
the Company or its subsidiaries, as applicable, and in full force and effect,
and the Company and each of its subsidiaries have performed all obligations
required to be performed by them until the date hereof under each Company
Agreement, except those that are not, and would not reasonably be expected to
be, material to the Company. Neither the Company nor any of its subsidiaries
knows of, or has received written notice, or to the knowledge of the Company,
verbal notice, of, any violation or default under (or any condition which with
the passage of time or the giving of notice would case such a violation of or
default under) any Company Agreement or any other loan or credit agreement,
note, bond, mortgage, indenture or lease, or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that are
not, or would not reasonably be expected to be, material to the Company.
Section 4.14. Environmental Matters
(a) The Company and each of its subsidiaries has been and is in material
compliance with all applicable Environmental Laws, including possessing all
material permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable Environmental Laws,
(all of the foregoing, whether material or not, the "Environmental Permits').
All such Environmental Permits are in effect, no appeal nor any other action is
pending to revoke any such Environmental Permit, and the Company and each of
its subsidiaries are in compliance in all material respects with all terms and
conditions of such Environmental Permits. To the extent required by applicable
Environmental Laws, the Company and each of its subsidiaries have filed (or
will have filed by the Closing Date) all applications necessary to renew or
obtain any Environmental Permits in a timely fashion so as to allow the Company
and each of its subsidiaries to continue to operate their businesses in
compliance with applicable Environmental Laws, and the Company does not expect
such new or renewed Environmental Permits to include any terms or conditions
that will have a material impact on the Company or any of its subsidiaries.
(b) There is no pending or threatened written claim, lawsuit, or
administrative proceeding against the Company or any of its subsidiaries, under
or pursuant to any Environmental Law, that has, or would reasonably be expected
to have, a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received written notice from any person, including any
Governmental Authority, alleging that the Company or any of its subsidiaries
has been or is in violation or potentially in violation of any applicable
Environmental Law or otherwise may be liable under any applicable Environmental
Law, which violation or liability is unresolved. Neither the Company nor any of
its subsidiaries has received any written request for information from any
person, including but not limited to any Governmental Authority, related to
liability under or compliance with any applicable Environmental Law, except for
such matters, if they matured into a claim against the Company or any of its
subsidiaries, that do not have, or would not reasonably be expected to have a
Company Material Adverse Effect.
(c) With respect to the real property that is currently owned, leased or
operated by the Company or any of its subsidiaries, there have been no Releases
of Hazardous Substances on or underneath any of such real property that have,
or would reasonably be expected to have, a Company Material Adverse Effect.
(d) With respect to real property that was formerly owned, leased or
operated by the Company or any of its subsidiaries or any of their predecessors
in interest, there were no Releases of Hazardous Substances on or underneath
any of such real property during or prior to the Company's or any of its
subsidiaries' ownership or operation of such real property that have, or would
reasonably be expected to have, a Company Material Adverse Effect.
(e) Neither the Company nor any of its subsidiaries has entered into any
agreement that may require them to pay to, reimburse, guarantee, pledge,
defend, indemnify or hold harmless any person from or against any liabilities
or costs arising out of or related to the generation, manufacture, use,
transportation or disposal of Hazardous Substances, or otherwise arising in
connection with or under Environmental Laws.
20
(f) Except as set forth in Section 4.14(f) of the Disclosure Schedule, the
Company and each of its subsidiaries have never engaged in any activities that
have required or should have required the Company or any of its subsidiaries to
obtain a permit as a transporter of hazardous waste (as such term is defined
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et
seq. ("RCRA") or any similar state statute), or as the owner or operator of a
facility that treated, stored or disposed of hazardous waste, in accordance
with the requirements of RCRA or any similar state statute.
(g) Except as set forth in Section 4.14 of the Disclosure Schedule, or
except with respect to former underground storage tanks that have been removed
or closed in place in accordance with applicable Law and as to which no further
action (including no further environmental investigation or cleanup) is
required and no further costs or liability is involved, neither the Company nor
any of its subsidiaries currently owns or operates or formerly owned or
operated any underground storage tanks subject to regulation pursuant to
Subchapter IX of RCRA (42 U.S.C. (S)(S) 6991-6991i) or similar statute statutes.
(h) To the knowledge of the Company, neither the Company nor any of its
subsidiaries, within the next five years, will be required to expend monies for
capital improvements in order to (1) comply or maintain compliance with
applicable Environmental Laws or (2) comply with regulatory requirements that
are not now effective, but to the knowledge of the Company, will be or are
reasonably expected to become effective after the Closing Date, except for such
expenditures that are reasonably expected to be less than $60,000 per annum and
$200,000 in the aggregate.
Section 4.15. Intellectual Property
(a) As used herein: (i) "Intellectual Property" means all U.S. and foreign
(a) trademarks, service marks, trade names, Internet domain names, designs,
logos, slogans and general intangibles of like nature, together with goodwill,
registrations and applications relating to the foregoing ("Trademarks"); (b)
patents and pending patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues, reexaminations, and
any extensions thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention and like
statutory rights ("Patents"), (c) registered and unregistered copyrights
(including those in Software), rights of publicity and all registrations and
applications to register the same ("Copyrights"); and (d) confidential
information, technology, know-how, inventions, processes, formulae, algorithms,
models and methodologies ("Trade Secrets"); (ii) "IP Licenses" means all
licenses and agreements (excluding "click-wrap" or "shrink-wrap" agreements or
agreements contained in "off-the-shelf" Software or the terms of use or service
for any Web site) pursuant to which the Company and its subsidiaries have
acquired rights in (including usage rights) to any Intellectual Property, or
licenses and agreements pursuant to which the Company and its subsidiaries have
licensed or transferred the right to use any Intellectual Property, including
license agreements, settlement agreements and covenants not to sue; (iii)
"Software" means all computer programs, including any and all software
implementations of algorithms, models and methodologies whether in source code
or object code form, databases and compilations, including any and all data and
collections of data, all documentation, including user manuals and training
materials, related to any of the foregoing and the content and information
contained on any Web site; and (iv) "Company Intellectual Property" means the
Intellectual Property and Software held for use or used in the business of
Company or its subsidiaries as presently conducted or as currently proposed to
be conducted.
(b) Section 4.15(b) of the Disclosure Schedule sets forth, for the
following Intellectual Property owned by the Company and its subsidiaries, a
complete and accurate list of all U.S., state and foreign: (i) Patents;
(ii) Trademarks (including Internet domain name registrations) and material
unregistered trademarks and service marks; and (iii) Copyrights and material
unregistered copyrights.
(c) Section 4.15(c) of the Disclosure Schedule lists all material Software
which is owned by the Company or its subsidiaries ("Proprietary Software"), and
all material IP Licenses.
(d) The Company, or one of its subsidiaries, owns or possesses licenses or
other legal rights to use, sell or license all Company Intellectual Property,
free and clear of all Liens, except Permitted Liens.
21
(e) All Trademarks, Patents and Copyrights owned by the Company and its
subsidiaries and to the knowledge of the Company, all Trademarks, Patents and
Copyrights used by but not owned by the Company and its subsidiaries are valid
and subsisting, in full force and effect and have not lapsed, expired or been
abandoned, and are not the subject of any opposition filed with the United
States Patent and Trademark Office or any other intellectual property registry.
(f) The Company Intellectual Property and the IP Licenses constitute all
the Intellectual Property, Software and IP Licenses that are necessary for the
continuing conduct and operation of the Company's business (as described in the
Company's Annual Report filed with the SEC on Form 10-K for the period ending
December 31, 2000) in all material respects as conducted and operated by the
Company immediately prior to the date hereof.
(g) Except as set forth in Section 4.15(g) of the Disclosure Schedule:
(i) no claims, or to the knowledge of Company, threat of claims, have
been asserted by any Third Party against the Company or any of its
subsidiaries related to the use in the conduct of the businesses of the
Company and its subsidiaries of any Intellectual Property or Software, or
challenging or questioning the validity or effectiveness of any IP License;
(ii) no settlement agreements, consents, judgments, orders,
forebearances to sue or similar obligations limit or restrict the Company's
or any subsidiary's rights in and to any Company Intellectual Property ;
(iii) to the knowledge of the Company, the conduct of the businesses of
the Company and its subsidiaries does not infringe, misappropriate, dilute
or otherwise violate any Intellectual Property rights of any Third Party.
(iv) the Company and its subsidiaries have not licensed or sublicensed
their rights in any Company Intellectual Property, or received or been
granted any such rights, other than pursuant to the IP Licenses;
(v) to the knowledge of the Company, no Third Party is misappropriating,
infringing, diluting or violating any Intellectual Property owned by the
Company or its subsidiaries;
(vi) the IP Licenses are valid and binding obligations of the Company
and/or the relevant subsidiary, enforceable in accordance with their terms,
and there is no material default thereof by the Company or any of its
subsidiaries or, to the knowledge of the Company, of the other party thereto;
(vii) the Company and its subsidiaries have taken all reasonable
measures to protect the confidentiality of their Trade Secrets; and
(viii) the consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Company's and its subsidiaries'
rights to own or use any of the Company Intellectual Property, nor will such
consummation require the consent of any Third Party in respect of any
Intellectual Property.
Section 4.16. Title, Sufficiency and Condition of Assets
(a) The Company and its subsidiaries, in each case, have good and valid
title to their owned assets and properties (in each case, tangible and
intangible) or, in the case of assets and properties which they lease, license
or have other rights in, valid leasehold, license or other interests in such,
assets and properties, in each case, free and clear of all Liens, except for
Permitted Liens.
(b) The Company and its subsidiaries have good and valid title to, or
rights by lease, license or other agreement to use, all assets and properties
(in each case, tangible and intangible) necessary to permit the Company and its
subsidiaries to conduct their business as currently conducted. The assets and
properties (in each case, tangible and intangible) owned or used by the Company
are in satisfactory condition and repair for their continued use as they have
been used and adequate in all material respects for their current use.
22
Section 4.17. Transactions with Affiliates. Except as disclosed in Section
4.17 of the Disclosure Schedule, since December 31, 2000, there has been no
transaction, or series of similar transactions, agreements, arrangements or
understandings, nor are there any currently proposed transactions, or series of
similar transactions, agreements, arrangements or understandings to which the
Company or any of its subsidiaries was or is to be a party, that would be
required to be disclosed under Item 404 of Regulation S-K promulgated under the
Securities Act.
Section 4.18. Opinion of Financial Advisor. The Company has received an
opinion from Morgan Keegan & Company, Inc. to the effect that the consideration
to be received by the shareholders of the Company pursuant to the Offer and the
Merger is fair to such shareholders from a financial point of view, a copy of
which opinion has been delivered to Parent.
Section 4.19. Broker's or Finder's Fee. Except for the fees of Morgan
Keegan & Company, Inc. (whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm, a true and correct copy
of which has been previously delivered to Parent by the Company), no agent,
broker, person or firm acting on behalf of the Company or its subsidiaries is,
or will be, entitled to any fee, commission or broker's or finder's fees from
any of the parties hereto, or from any person controlling, controlled by, or
under common control with, any of the parties hereto, in connection with this
Agreement, the Shareholder Agreements or any of the transactions contemplated
hereby or thereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and the Merger Sub represent and warrant to the Company as follows:
Section 5.1. Organization and Qualification. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Utah. Each of Parent and Merger Sub has the requisite
corporate power and corporate authority and any necessary material governmental
authority, franchise, license, certificate or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures to be
so qualified and in good standing which are not, and would not be reasonably
likely to be, material to Parent.
Section 5.2. Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Merger Sub has the requisite corporate power and
corporate authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement by each of Parent and Merger Sub
and the consummation by each of Parent and Merger Sub of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of each of Parent and Merger Sub. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and
Merger Sub enforceable against each of Parent and Merger Sub in accordance with
its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and by
general equitable principles. The authorized capital stock of Parent consists
of (A) 500,000,000 shares of common stock, par value $2.50 per share and (B)
20,000,000 shares of preferred stock, no par value, of which no shares are
outstanding. As of September 30, 2001, 248,385,281 shares of Parent Common
Stock were issued and outstanding and 27,102,444
23
shares of Parent Common Stock were held in the treasury of Parent. In addition,
Parent may issue shares of its capital stock upon the exercise or conversion of
presently outstanding securities, the number and terms of which are summarized
in the Parent SEC Documents as of the respective dates thereof. The shares of
Parent Common Stock to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
Section 5.3. Consents and Approvals; No Violations.
(a) Except for filings and Permits as may be required under, and other
applicable requirements of, the Exchange Act, the Securities Act, the URBCA,
state blue sky laws and any applicable state takeover laws, neither the
execution, delivery or performance of this Agreement by Parent and the Merger
Sub nor the consummation by Parent and the Merger Sub of the transactions
contemplated hereby nor compliance by Parent and the Merger Sub with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the respective articles of incorporation or by-laws of Parent or
Merger Sub, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any Indebtedness, lease, license,
Permit, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iii) violate any Law applicable to Parent
or Merger Sub or any of their respective properties or assets, except in the
case of (ii) and (iii) for such violations, breaches or defaults which do not
have, and would not reasonably be expected to have, a Parent Material Adverse
Effect and which will not materially impair the ability of Parent or Merger Sub
to consummate or prevent or materially delay the consummation of the Offer and
the Merger or the other transactions contemplated hereby.
(b) No Consent by a Governmental Authority is required by or with respect
to Parent or Merger Sub in connection with the execution and delivery of this
Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub
of the transactions contemplated by this Agreement, except for (i) the filing
of a premerger notification and report form by Parent under the HSR Act, and
any applicable filings under other Antitrust Laws, (ii) the filing with the SEC
of (A) the Offer Documents and (B) such reports under the Exchange Act and the
Securities Act, as may be required in connection with this Agreement and the
transactions contemplated hereby, (iii) such filings as may be required under
state securities or "blue sky" laws, (iv) the filing of the Articles of Merger
with the Utah Department of Commerce, Division of Corporations and Commercial
Code, and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings, the
failure of which to be made or obtained, do not have, and would not reasonably
be expected to have, a Parent Material Adverse Effect, and which will not
materially impair the ability of Parent or Merger Sub to consummate, or to
prevent or materially delay the consummation of, the transactions contemplated
hereby.
Section 5.4. Information To Be Supplied.
(a) The information with respect to Parent and Merger Sub that Parent
and/or Merger Sub, as the case may be, furnishes to the Company in writing
specifically for use in the 14D-9 and the Proxy Statement, at the time the
14D-9 is first sent or given to shareholders of the Company, and in the case of
the Proxy Statement, at the time the Proxy Statement is mailed to the Company's
shareholders or, at the time of the Company Shareholder Meeting, will 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. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act.
(b) Notwithstanding the foregoing provisions of this Section 5.4, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference in the Proxy Statement or the Offer Documents based
on information supplied by the Company expressly for inclusion or incorporation
by reference therein or based on information which is not made in or
incorporated by reference in such documents but which should have been
disclosed pursuant to Section 4.8.
24
Section 5.5. SEC Reports and Financial Statements. Parent has filed with
the SEC, and has heretofore made available to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its subsidiaries since December 31, 1998 under
the Exchange Act or the Securities Act (as such documents have been amended
since the time of their filing, collectively, the "Parent SEC Documents"). As
of their respective dates or, if amended, as of the date of the last such
amendment, the Parent SEC Documents, including any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial
statements included in the Parent SEC Documents have been prepared from, and
are in accordance with, the books and records of Parent and its consolidated
subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of Parent and its consolidated subsidiaries as at the dates
thereof or for the periods presented therein.
Section 5.6. Financing. Either Parent or the Merger Sub has, or will have
prior to the satisfaction of the conditions to the Offer, sufficient funds
available (through existing credit arrangements or otherwise) to deliver the
Exchange Offer Consideration and Merger Consideration to all of the Company
Shares outstanding which become entitled to receive such consideration.
Section 5.7. Taxes. Neither Parent nor any of its subsidiaries, including
Merger Sub, has taken any action or knows of any fact, circumstance, plan or
intention that will, or would be reasonably likely to, prevent the Transaction
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
ARTICLE III
COVENANTS
Section 6.1. Interim Operations of the Company. The Company covenants and
agrees that, except as expressly provided in this Agreement, or with the prior
written consent of Parent, which consent shall not be unreasonably withheld,
conditioned, or delayed, after the date hereof and prior to the Effective Time:
(a) the business of the Company and its subsidiaries shall be conducted
only in the ordinary and customary course consistent with past practice,
including, taking all reasonable measures to protect the confidentiality of the
Company's and its subsidiaries' Trade Secrets, and, to the extent consistent
therewith, each of the Company and its subsidiaries shall use reasonable best
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Shares, or any outstanding capital stock of
any of the subsidiaries of the Company;
(c) neither the Company nor any of its subsidiaries shall: (i) amend its
articles of incorporation or bylaws or similar organizational documents; (ii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock; (iii) issue, sell,
transfer, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of
any class of the Company or its subsidiaries, other than issuances pursuant to
the exercise of Company Options outstanding on the date hereof; (iv) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any material
assets other than in the ordinary and usual course of business and consistent
with past practice, or incur or modify any material Indebtedness; or (v)
redeem, purchase or otherwise acquire directly or indirectly any of its capital
stock;
25
(d) neither the Company or any of its subsidiaries shall: (i) increase the
compensation or benefits payable to any director, officer, other employee or
consultant of the Company or any of its subsidiaries, other than in the
ordinary course of business consistent with past practice; (ii) grant any
severance or termination pay to (or amend any such existing arrangement with)
any director, officer, other employee or consultant of the Company or any of
its subsidiaries; (iii) enter into any employment, deferred compensation or
other similar agreement (or amend any such existing agreement) with any
director, officer, other employee or contractor of the Company or any of its
subsidiaries; (iv) increase any benefits payable under any existing severance
or termination pay policies or agreements or employment agreements; or (v)
permit any director, officer, other employee or contractor of the Company or
any of its subsidiaries who is not already a party to an agreement or a
participant in a plan providing benefits upon or following a "change in
control" to become a party to any such agreement or a participant in any such
plan, other than pursuant to a pre-existing contractual commitment or as
required by applicable Law;
(e) neither the Company nor any of its subsidiaries shall: (i) adopt any
new Benefit Plan, terminate any Benefit Plan or modify any Benefit Plan in a
way that could result in additional cost to Parent, the Company or any of their
respective subsidiaries, except for any amendments to a Benefit Plan required
to maintain its qualified plan status under Section 401(a) of the Code; (ii)
modify any actuarial cost method, assumption or practice used in determining
benefit obligations, annual expense and funding for any Benefit Plan, except to
the extent required by GAAP; (iii) subject to any ERISA fiduciary obligation,
modify the investment philosophy of the Benefit Plan trusts or maintain an
asset allocation which is not consistent with such philosophy; (iv) subject to
any ERISA fiduciary obligation, enter into any outsourcing agreement, or any
other material contract relating to the Benefit Plans or management of the
Benefit Plan trusts; (v) grant any ad hoc pension increase; or (vi) establish
any new or fund any existing "rabbi" or similar trust (except in accordance
with the current terms of any Benefit Plan), or enter into any other
arrangement for the purpose of securing nonqualified retirement benefits,
termination benefits or deferred compensation;
(f) neither the Company nor any of its subsidiaries shall modify, amend or
terminate any of the Company Agreements or waive, release or assign any
material rights or claims, except in the ordinary course of business and
consistent with past practice;
(g) neither the Company nor any of its subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(h) neither the Company nor any of its subsidiaries shall: (i) incur
Indebtedness; provided, however, the Company may incur Indebtedness, if such
Indebtedness is incurred on an arm's length basis with nationally recognized
financial institutions and such Indebtedness does not exceed $500,000 in net
debt and is incurred in the ordinary course of business consistent with past
practice; (ii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly-owned subsidiaries of
the Company); or (iii) enter into any material commitment or transaction
(including any borrowing, capital expenditure or purchase, sale or lease of
assets) requiring a capital expenditure by the Company or its subsidiaries
other than capital expenditures pursuant to the Company's capital expenditures
budget previously furnished to Parent and other capital expenditures that do
not exceed $50,000 in the aggregate since June 30, 2001;
(i) neither the Company nor any of its subsidiaries shall change any method
of reporting income, deductions or other items for income Tax purposes, make or
change any election with respect to Taxes, agree to or settle any claim or
assessment in respect of Taxes, or agree to an extension or waiver of the
limitation period to any claim or assessment in respect of Taxes, other than in
the ordinary course of business consistent with past practice or as required by
Law;
(j) neither the Company nor any of its subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
26
(k) neither the Company nor any of its subsidiaries shall pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, (i) in the
ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated
by, the consolidated financial statements (or the notes thereto) of the Company
and its consolidated subsidiaries, (ii) incurred in the ordinary course of
business and consistent with past practice or (iii) which are legally required
to be paid, discharged or satisfied (provided that if such claims, liabilities
or obligations referred to in this clause (iii) are legally required to be paid
and are also not otherwise payable in accordance with clauses (i) or (ii)
above, the Company will notify Parent in writing reasonably in advance of their
payment if such claims, liabilities or obligations exceed, individually or in
the aggregate, $25,000 in value);
(l) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment in another entity (other than an entity which is
a wholly-owned subsidiary of the Company as of the date hereof and other than
incorporation of a wholly-owned subsidiary of the Company) or (ii) sell,
pledge, dispose of, or encumber or authorize or propose the sale, pledge,
disposition or encumbrance of any assets of the Company or any of its
subsidiaries, except in the ordinary and customary course of business
consistent with past practice;
(m) take any action which it believes when taken could reasonably be
expected to adversely affect or delay in any material respect the ability of
any of the parties hereto to obtain any approval of any Governmental Authority
required to consummate the transactions contemplated hereby;
(n) take any action to cause the Company Shares to cease to be quoted on
the Nasdaq National Market prior to the Closing Date;
(o) neither the Company nor any of its subsidiaries will take, or agree to
commit to take, any action that would make any representation or warranty of
the Company contained herein inaccurate in any respect at, or as of any time
prior to, the Effective Time; and
(p) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 6.2. Preparation of Proxy Statement; Company Shareholder Meeting.
(a) If required by applicable Law, promptly after the acceptance for
exchange of Company Shares pursuant to the Offer, the Company shall prepare and
file with the SEC under the Exchange Act the Proxy Statement and use all
reasonable best efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable after the acceptance by Parent for exchange of Company
Shares pursuant to the Offer. The Company shall mail the Proxy Statement to its
shareholders as promptly as practicable after the Proxy Statement has cleared
the SEC. Each of the Company, Parent and Merger Sub will promptly correct any
information provided by it for use in the Proxy Statement if and to the extent
that it shall have become false or misleading in any material respect prior to
the Company Shareholder Meeting, and the Company will cause the Proxy Statement
as so corrected to be filed with the SEC and to be disseminated to holders of
Company Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review and comment upon the Proxy Statement before it is filed
with the SEC. In addition, the Company agrees to provide Parent, Merger Sub and
their counsel with any comments that the Company or its counsel may receive
from time to time from the SEC or its staff with respect to the Proxy Statement
promptly after the receipt of such comments and to consult with Parent, Merger
Sub and their counsel prior to responding to any such comments. The Company
will advise Parent of the time when the SEC has cleared the Proxy Statement,
promptly after it receives notice thereof.
27
(b) If approval of the Company's shareholders is required by applicable law
in order to consummate the Merger, the Company shall establish, prior to or as
soon as practicable following the date upon which the Proxy Statement has been
cleared by the SEC, a record date (which shall be prior to or as soon as
practicable following the date upon which the Proxy Statement has been cleared
by the SEC) for, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Shareholder Meeting") for the purpose of considering
and taking action upon this Agreement and the Merger and (with the consent of
Parent) such other matters as may in the reasonable judgment of the Company be
appropriate for consideration at the Company Shareholder Meeting. Once the
Company Shareholder Meeting has been called and noticed, the Company shall not
postpone or adjourn the Company Shareholder Meeting (other than for the absence
of a quorum) without the consent of Parent. The Board of Directors of the
Company shall include the Recommendations in the Proxy Statement as such
Recommendations pertain to the Merger and this Agreement. The Company shall use
its reasonable best efforts to solicit from shareholders of the Company proxies
in favor of this Agreement and the Merger and shall take all other actions
necessary or advisable to secure the vote or consent of shareholders required
by the URBCA to effect the Merger.
(c) Notwithstanding the foregoing clauses (a) and (b) above, in the event
that Parent shall acquire at least 90% of the outstanding Company Shares in the
Offer, subject to the satisfaction or (to the extent permitted hereunder)
waiver of all conditions to the Merger, the parties hereto shall take all
necessary actions to cause the Merger to become effective, as soon as
practicable after the acceptance for exchange and purchase of such Company
Shares pursuant to the Offer, without a meeting of shareholders of the Company,
in accordance with Section 16-10a-1104 of the URBCA, including, the
contribution by Parent to Merger Sub of all Company Shares then held by Parent
or such other actions as may be necessary such that the Transaction will
qualify as a reorganization under Section 368(a) of the Code.
Section 6.3. Access to Information. The Company shall (and shall cause
each of its subsidiaries to) afford to the Representatives of Parent reasonable
access, during normal business hours, during the period from the date hereof
and prior to the Effective Time, to all of its and its subsidiaries'
properties, books, contracts, commitments, records and officers, and during
such period, the Company shall (and shall cause each of its subsidiaries to)
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of the federal securities laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request.
Section 6.4. No Solicitation; Acquisition Proposals. (a) From the date of
this Agreement until the Effective Time or, if earlier, the termination of this
Agreement in accordance with its terms, (1) the Company shall, and the Company
shall cause its and its subsidiaries' respective Representatives to,
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Third Party
conducted heretofore by the Company, its subsidiaries or their respective
Representatives with respect to any Acquisition Proposal and (2) the Company
shall not, and the Company shall cause its and its subsidiaries' respective
Representatives not to, directly or indirectly, (i) solicit, initiate or
knowingly encourage (including by way of furnishing information), or knowingly
take any other action to facilitate, any inquiries or the making or submission
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; (ii) enter into any agreement, arrangement or
understanding with respect to any Acquisition Proposal or enter into any
agreement, arrangement or understanding requiring the Company to abandon,
terminate or fail to consummate the exchange of Company Shares pursuant to the
Offer or the Merger or any other transaction contemplated by this Agreement;
(iii) participate or engage in any discussions or negotiations with, or
disclose or provide any non-public information or data relating to the Company
or its subsidiaries or afford access to the properties, books or records or
employees of the Company or its subsidiaries to, any Third Party relating to an
Acquisition Proposal, or knowingly facilitate any effort or attempt to make or
implement an Acquisition Proposal or accept an Acquisition Proposal; or (iv)
enter into any letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any Acquisition Proposal.
(b) Notwithstanding the restrictions set forth in Section 6.4(a), if, at
any time prior to the exchange of Company Shares pursuant to the Offer, (1) the
Company has received an unsolicited bona fide written proposal
28
from a Third Party relating to an Acquisition Proposal (under circumstances in
which the Company has complied with its obligations under Section 6.4(a)) and
(2) the Board of Directors of the Company concludes in good faith (after
consultation with a financial advisor of nationally recognized reputation and
after receiving the written advice of its outside counsel) (i) that such
Acquisition Proposal constitutes a Superior Proposal and (ii) that the failure
to provide such information or participate in such negotiations or discussions
would result in a breach by the Board of Directors of the Company of its
fiduciary duties to the Company's Shareholders under applicable Law, the
Company may, subject to its giving Parent at least two business days' prior
written notice of the identity of such Third Party and all of the terms and
conditions of such Acquisition Proposal and of the Company's intention to
furnish nonpublic information to, or enter into discussions or negotiations
with, such Third Party, (x) furnish information with respect to the Company and
its subsidiaries to any Third Party pursuant to a customary confidentiality
agreement containing terms no less restrictive than the terms of the
Confidentiality Agreement dated March 7, 2001, entered into between Morgan
Keegan & Company, on behalf of the Company, and Overnite Transportation
Company, as the same may be amended, supplemented or modified (the
"Confidentiality Agreement"), provided that a copy of all such information is
delivered simultaneously to Parent if it has not previously been so furnished
to Parent, and (y) participate in discussions or negotiations regarding such
proposal.
(c) The Company shall as soon as practicable (and in any event within 24
hours) notify and advise Parent orally and in writing of any Acquisition
Proposal or of any request for information or inquiry that may lead to an
Acquisition Proposal, the terms and conditions of such Acquisition Proposal,
request or inquiry, and the identity of the person making such Acquisition
Proposal, request or inquiry. The Company shall inform Parent on a prompt and
current basis of the status, content and details of any discussions regarding,
or relating to, any Acquisition Proposal with a Third Party (including
amendments and proposed amendments) and, as promptly as practicable, of any
change in the price, structure or form of the consideration or material terms
of and conditions regarding the Acquisition Proposal. In fulfilling its
obligations under this paragraph (c) of this Section 6.4, the Company shall
provide promptly to Parent copies of all written correspondence or other
written material, including material in electronic form, between the Company
and such Third Party, except in the event where the delivery of such copies
would result in a breach by the Board of Directors of the Company of its
fiduciary duties to the Company's Shareholders under applicable Law.
(d) The Company agrees that it will promptly inform its and its
subsidiaries' respective Representatives of the obligations undertaken in this
Section 6.4.
(e) Nothing contained in this Section 6.4 or Section 6.5 hereof shall
prohibit the Company from taking and disclosing to its shareholders a position
as required by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act.
(f) For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, offer, proposal or intended
proposal, indication of interest, signed agreement or completed action, as
the case may be, by any Third Party which relates to a transaction or series
of transactions (including any merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination) involving the
Company or any of its subsidiaries or the issuance or acquisition of shares
of capital stock or other equity securities of the Company or any of its
subsidiaries representing 15% or more (by voting power) of the outstanding
capital stock of the Company or such subsidiary or any tender or exchange
offer that if consummated would result in any person, together with all
affiliates thereof, Beneficially Owning shares of capital stock or other
equity securities of the Company or any of its subsidiaries representing 15%
or more (by voting power) of the outstanding capital stock of the Company or
such subsidiary, or the acquisition, license, purchase or other disposition
of a substantial portion of the technology, business or assets of the
Company or any of its subsidiaries outside the ordinary course of business
or inconsistent with past practice; and
"Superior Proposal" means any bona fide written Acquisition Proposal
(provided that for the purposes of this definition, the applicable
percentages in the definition of Acquisition Proposal shall be seventy-five
29
percent (75%) as opposed to fifteen percent (15%)), on its most recently
amended or modified terms, if amended or modified, which the Board of
Directors of the Company determines in its good faith judgment (after
receipt of the advice of a financial advisor of nationally recognized
reputation and receiving advice of its outside counsel), taking into
account, among other things, all legal, financial, regulatory, timing and
other aspects of the proposal and the Third Party making the proposal (i)
would, if consummated, result in a transaction that is more favorable to the
Company's shareholders (in their capaci-ties as shareholders), from a
financial point of view, than the transactions contemplated by this
Agreement and (ii) is reasonably capable of being completed.
(g) The Company agrees not to release or permit the release of any person
from, or to waive or permit thewaiver of any provision of, any confidentiality,
"standstill" or similar agreement to which any of the Company or its
subsidiaries is a party and will promptly provide Parent with a copy of such
agreements. The Company will use its best efforts to enforce or cause to be
enforced each such agreement at the request of Parent.
Section 6.5. Modifications to Recommendations. Except as expressly
permitted by this Section 6.5, neither the Board of Directors of the Com-pany
nor any committee thereof shall (i) withdraw, qualify, modify or amend, or
propose to withdraw, qualify, modify or amend, in a manner adverse to Parent,
the Recommendations or take any action or make any statement, filing or release
inconsistent with such Recommendations (it being understood that taking a
neutral position or no position with respect to an Acquisition Proposal shall
be considered an adverse modification of the Recommendations), (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
related to any Acquisition Proposal (each of the foregoing being referred to as
a "Subsequent Determination"), provided that, if prior to the consummation of
the Offer, the Board of Directors of the Company determines in good faith,
after it has received a Superior Proposal and after receipt of written advice
from outside counsel, that the failure to make a Subsequent Determination would
result in a breach by the Board of Directors of the Company of its fiduciary
duties to the Company's shareholders under applicable Law, the Board of
Directors of the Company may (subject to this and the following sentences)
inform the Company's shareholders that it no longer believes that exchange of
Company Shares pursuant to the Offer and the other transactions contemplated
hereby are advisable, but only at a time that is after 5:00 p.m., New York City
time, on the third business day following delivery by the Company to Parent of
a written notice (a "Subsequent Determination Notice") (i) advising Parent that
the Board of Directors of the Company has received a Superior Proposal, (ii)
specifying the terms and conditions of such Superior Proposal, including the
amount per share that the Company's shareholders will receive per Company Share
(valuing any non-cash consideration at what the Board of Directors of the
Company determines in good faith, after consulta-tion with its independent
financial advisor, to be the fair value of the non-cash consideration) and
including a copy thereof with all accompanying documentation, except in the
event where the inclusion of such copy would result in a breach by the Board of
Directors of the Company of its fiduciary duties to the Company's Shareholders
under applicable Law, (iii) identifying the person making such Superior
Proposal and (iv) stating that the Company intends to make a Subsequent
Determination. After providing such notice, the Company shall provide a
reasonable opportunity to Parent, and shall cooperate in good faith with
Parent, to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with its Recommendations to its
shareholders without a Subsequent Determination; provided, however, that any
such adjustment to this Agreement shall be at the discretion of Parent at the
time.
Section 6.6. HSR Act Filings; Reasonable Best Efforts
(a) Each of Parent and the Company shall (i) promptly make or cause to be
made the filings required of such party or any of its subsidiaries under the
HSR Act and any other Antitrust Laws with respect to the Offer, the Merger and
the other transactions contemplated by this Agreement, (ii) comply at the
earliest reasonable practicable date with any request under the HSR Act or such
other Antitrust Laws for additional information, documents, or other material
received by such party or any of its subsidiaries from the Federal Trade
Commission or the Department of Justice or any other Governmental Authority in
respect of such filings, the
30
Offer, the Merger or such other transactions, (iii) cooperate with the other
party in connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Antitrust Laws with respect to any such filing, the Offer,
the Merger or such other transactions, and (iv) use reasonable best efforts to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the Offer, the Merger or any other transactions
contemplated under this Agreement under the Antitrust Laws. The Company shall
not propose to enter into, or enter into, any agreement, arrangement or
understanding with any Governmental Authority with respect to any Governmental
Authority's review of the Offer, the Merger or any other transactions
contemplated under this Agreement without the prior written consent of Parent.
(b) Subject to Section 6.4 and Section 6.5 of this Agreement, each of the
parties agrees to use reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger, and the other transactions contemplated by this Agreement,
including (i) the obtaining of all other necessary actions or nonactions,
waivers, consents and approvals from Governmental Authorities and the making of
all other necessary registrations and filings (including other filings with
Governmental Authorities, if any), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the preparation of the
Offer Registration Statement, the Offer Documents, the Schedule 14D-9 and, if
necessary, the Proxy Statement, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.
(c) Notwithstanding anything to the contrary in this Section 6.6, (i)
neither Parent nor any of its subsidiaries shall be required to divest any of
their or the Company's or any of its subsidiaries' respective businesses,
product lines or assets, (ii) neither Parent nor any of its subsidiaries shall
be required to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have an adverse effect on the
business, assets, condition (financial or otherwise), results of operations or
prospects of Parent and its subsidiaries, taken as a whole, or of Parent
combined with the Surviving Corporation after the Effective Time, (iii) no
party shall be required to agree to the imposition of or to comply with, any
condition, obligation or restriction on Parent or any of its subsidiaries or on
the Surviving Corporation or any of its subsidiaries of the type referred to in
subclause (a) or (b) of clause (5) of Annex A or Section 7.1(b), (iv) neither
Parent nor Merger Sub shall be required to waive any of the conditions to the
Offer set forth in Annex A or any of the conditions of to the Merger set forth
in Article VIII, and (v) no party shall be required to pursue or defend any
administrative or judicial action or proceeding that may be instituted or
threatened.
(d) Payment of HSR Filing Fee. Any filing fee payable under or pursuant to
the HSR Act shall be paid in full by Parent regardless of whether the Offer,
the Merger, this Agreement or the other transactions contemplated hereby are
consummated.
Section 6.7. Litigation. The Company shall give Parent the opportunity to
participate in the defense of any litigation against the Company and/or its
directors relating to the transactions contemplated by this Agreement or any
other Acquisition Proposal and will not settle or compromise any such action
without the prior written consent of Parent.
Section 6.8. Certain Benefit Matters. Parent agrees to cause the Surviving
Corporation and its subsidiaries to honor and assume the Salary Continuation
Agreements listed on Section 6.8 of the Disclosure Schedule (the "Salary
Continuation Agreements"), true and accurate copies of which have previously
been provided to Parent. If Parent shall notify Company prior to the Effective
Time that Parent wishes to substitute alternate contractual arrangements (to
become effective as of the Effective Time) with one or more of the persons
subject to such agreements, the Company agrees to use its best efforts to
facilitate Parent's negotiations with any such person and to cooperate in
making any such contractual changes which are agreed upon by Parent and such
person.
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Section 6.9. Additional Agreements. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of Merger Sub or the Company or otherwise
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of Merger Sub or the Company, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of Merger Sub or
the Company, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of Parent shall use
reasonable best efforts to take, or cause to be taken, all such necessary
actions.
Section 6.10. Publicity. So long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release or other announcement with respect to the
Offer, the Merger, this Agreement or the other transactions contemplated hereby
without the prior consultation of the other party, except as may be required by
Law or by any rules and regulations of the NASD or any applicable securities
exchange or listing agreement with any applicable securities exchange or the
Nasdaq National Market.
Section 6.11. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent or Merger Sub shall give prompt notice to
the Company, of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any material respect and (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent or Merger
Sub shall give prompt notice to the Company, of: (i) any notice or other
communication 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 from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
and (iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or involving
or otherwise affecting it or any of its subsidiaries which, if pending on the
date of this Agreement would have been required to have been disclosed pursuant
to Article IV and Article V or which relate to the consummation of the
transactions contemplated by this Agreement.
Section 6.12. Directors' and Officers' Indemnification and Insurance. The
Surviving Corporation shall, and Parent shall cause the Surviving Corporation
to, (i) indemnify and hold harmless, and provide advancement of expenses to,
all current or former directors, officers and employees of the Company and its
subsidiaries (in all of their capacities) (a) to the same extent such persons
are indemnified or have the right to advancement of expenses as of the date of
this Agreement by the Company pursuant to the Company's Articles of
Incorporation, Bylaws, indemnification agreements, if any, in existence on the
date hereof with any directors, officers and employees of the Company and its
subsidiaries and the URBCA and (b) without limitation to clause (a), to the
fullest extent permitted by law, in each case for acts or omissions occurring
at or prior to the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), (ii) include and cause to be maintained in
effect in the Surviving Corporation's (or any successor's) Articles of
Incorporation and Bylaws for a period of six years after the Effective Time,
the current provisions regarding elimination of liability of directors,
indemnification of officers, directors and employees and advancement of
expenses contained in the Articles of Incorporation and Bylaws of the Company
and (iii) cause to be maintained for a period of six years after the Effective
Time a policy (or a "tail" policy) of directors' and officers' liability
insurance and fiduciary liability insurance of at least
32
the same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured than the terms currently
provided to directors and officers of Parent with respect to claims arising
from facts or events that occurred on or before the Effective Time. The
obligations of the Surviving Corporation under this Section 6.12 shall not be
terminated or modified in such a manner as to adversely affect any indemnitee
to whom this Section 6.12 applies without the consent of such affected
indemnitee (it being expressly agreed that the indemnitees to whom this Section
6.12 applies shall be third party beneficiaries of this Section 6.12).
Section 6.13. Rule 145 Affiliates. Within 10 days after the date of this
Agreement, the Company shall deliver to Parent a letter identifying all persons
who may be deemed to be Rule 145 Affiliates. The Company shall use its
reasonable best efforts to cause each person who is so identified as a Rule 145
Affiliate to deliver to Parent at least 5 days prior to the initial expiration
of the Offer, an agreement substantially in the form of Exhibit B to this
Agreement.
Section 6.14. Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed between them,
coordinate and cooperate (i) with respect to the timing of the Company
Shareholder Meeting, (ii) in determining whether any action by or in respect
of, or filing with, any Governmental Authority 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, and (iii) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith and timely seeking to obtain any
such actions, consents approvals or waivers. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its
reasonable best efforts to have the Offer Registration Statement declared
effective under the Securities Act as promptly as practicable after the Offer
Registration Statement is filed, and Parent and the Company 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 Offer and the Merger and the general status of ongoing operations insofar
as relevant to the Offer and the Merger, provided that the parties will not
confer on any matter to the extent inconsistent with law.
Section 6.15. Tax-Free Reorganization Treatment.
(a) This Agreement is intended to constitute a plan of reorganization with
respect to the Transaction for United States Federal income tax purposes and
the parties hereto intend the Transaction to qualify as a reorganization within
the meaning of Section 368(a) of the Code. From and after the date of this
Agreement, each party hereto shall use its reasonable best efforts (and shall
cause its respective subsidiaries to use their reasonable best efforts) to
cause the Transaction to qualify, and shall not, without the prior written
consent of the other parties hereto, take any actions or cause any actions to
be taken which could reasonably be expected to prevent the Transaction from
qualifying as a reorganization under the provisions of Section 368(a) of the
Code. Following the Effective Time, neither the Surviving Corporation nor
Parent, nor any of their respective subsidiaries, shall take any action or
cause any action to be taken which could reasonably be expected to cause the
Transaction to fail to qualify as a reorganization under Section 368(a) of the
Code.
(b) The parties hereto shall cooperate and use their reasonable best
efforts in order for Parent to obtain an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP ("Skadden Arps"), counsel to Parent, that the Transaction
will be treated as a reorganization within the meaning of Section 368(a) of the
Code (the "Tax Opinion"). In connection therewith, both Parent (together with
Merger Sub) and the Company shall deliver to Skadden Arps representation
letters, dated and executed as of the Effective Time (and as of such other date
or dates as reasonably requested by Skadden Arps), in form and substance
substantially identical to those attached hereto as Exhibit C and Exhibit D,
respectively (allowing for such amendments to the representation letters as
Skadden Arps deems necessary) (together, the "Representation Letters").
Notwithstanding anything express or implied to the contrary in this Agreement,
but subject to the provisions of this Section 6.15, if such opinion cannot be
obtained, then, in Parent's reasonable discretion, the Merger shall not be
effected as described herein
33
and shall instead be effected as a merger of Merger Sub with and into the
Company (the "Reverse Merger") in accordance with the URBCA and the separate
existence of Merger Sub shall thereupon cease, and the Company, as the
surviving corporation in the Reverse Merger, shall continue its corporate
existence under the laws of the State of Utah as a wholly-owned subsidiary of
Parent.
(c) The parties hereto agree that they will not take any position on any
Federal, state, or local Tax Return, or take any other Tax reporting position,
that is inconsistent with the treatment of the Merger as a tax-free
reorganization, unless otherwise required by a decision by the Tax Court or a
judgment, decree, or other order by any court of competent jurisdiction, which
has become final and non-appealable, or by applicable state or local income or
franchise tax law, provided, however, that this clause (c) will not apply in
the event that the Merger is effected as a Reverse Merger pursuant to clause
(b) above.
(d) None of the parties hereto shall take or cause to be taken any action
which would cause to be untrue (or fail to take or cause not to be taken any
action which would cause to be untrue) any of the certifications and
representations included in the Representation Letters attached hereto as
Exhibit C and Exhibit D.
Section 6.16. Conveyance Taxes. The Company and Parent shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar Taxes
(together with any related interest, penalties or additions to tax, "Conveyance
Taxes") which become payable in connection with the transactions contemplated
by this Agreement. Notwithstanding any provision to the contrary contained in
this Agreement, other than Sections 3.4(g) and 3.5 hereof, each of Parent and
the Company shall pay, without deduction from any amount payable to holders of
Company Shares and without reimbursement from the other party, any such
Conveyance Taxes imposed on it by any Governmental Authority (and/or for which
its shareholders are primarily liable), which become payable in connection with
the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS
Section 7.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. If required under the URBCA, the Company
Shareholder Approval shall have been obtained.
(b) No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any Governmental Authority since the date
of this Agreement which prohibits or prevents the consummation of the Merger
which has not been vacated, dismissed or withdrawn prior to the Effective Time.
The Company and Parent shall use their reasonable best efforts to have any of
the foregoing vacated, dismissed or withdrawn by the Effective Time.
(c) Exchange of Company Shares. Parent or any of its affiliates shall have
purchased Company Shares pursuant to the Offer.
Section 7.2. Conditions to Obligations of Parent. The obligations of
Parent and Merger Sub to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the following additional condition: the
Company shall have performed and complied with in all material respect all its
covenants and agreements hereunder required by this Agreement to be performed
or complied with or satisfied by the Company at or prior to the Effective Time.
34
Section 7.3. Frustration of Conditions. Neither Parent nor the Company may
rely on the failure of any condition set forth in this Article VII to be
satisfied if such failure was caused by such party's failure to comply with or
perform any of its covenants or obligations set forth in this Agreement.
ARTICLE VIII
TERMINATION AND ABANDONMENT; EXPENSES
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
shareholders of the Company or Merger Sub:
(b) by mutual written consent of Parent and the Company;
(c) by either Parent or the Company:
(i) if the Offer shall have expired or been terminated in accordance
with the terms of this Agreement without Parent or Merger Sub having
accepted for exchange any Company Shares pursuant to the Offer, unless the
failure to consummate the Offer is the result of a material breach of this
Agreement by the party seeking to terminate this Agreement;
(ii) if the Offer shall not have been consummated on or before January
31, 2002 (the "Outside Date"), unless the failure to consummate the Offer is
the result of a material breach of this Agreement by the party seeking to
terminate this Agreement;
(iii) if the Merger shall not have been consummated on or prior to April
30, 2002 (the "Drop Dead Date"), provided, however, that the right to
terminate this Agreement pursuant to this Section 8.1(b)(iii) shall not be
available to any party whose willful and material breach of this Agreement
results in the failure of the Merger to be consummated by such time;
(iv) if the Merger shall not have been consummated as a result of any
condition thereto in Article VII being incapable of being satisfied; or
(v) if any statute, rule, regulation, judgment, order, legislation or
interpretation of any nature enacted, enforced, promulgated, amended or
issued by any Governmental Authority having the effects set forth in
subclause (a) or (b) of clause (5) of Annex A hereto;
(c) by Parent, upon the occurrence of any Trigger Event described in
Section 8.3(a) hereof; or
(d) by the Company, if the Company makes a Subsequent Determination in
compliance with Section 6.4 hereof and pursuant to the provisions of Section
6.5 hereof, provided the Company has paid Parent the sums required by Section
8.3(a) hereof.
The party desiring to terminate this Agreement pursuant to this Section 8.1
shall give written notice of such termination to the other party in accordance
with Section 9.4 hereof.
Section 8.2. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to
this Article VIII, this Agreement (other than Sections 8.2 and 8.3 and Article
IX) shall become void and of no further force or effect with no liability on
the part of any party hereto (or of any of its Representatives); provided,
however, that no such termination shall relieve any party hereto from any
liability for any breach of this Agreement prior to termination.
Section 8.3. Fees and Expenses.
(a) The Company agrees to pay Parent a fee in immediately available funds
equal to $5,000,000 (the "Liquidated Amount") promptly, but in no event later
than three business days, after the termination of this Agreement (or such
later date as may apply in the case of clause (i) below or such earlier time
prior to the termination of this Agreement in the case of clause (iv) below) as
a result of the occurrence of any of the events set forth below (each, a
"Trigger Event"):
35
(i) the Company shall have received an Acquisition Proposal, and at any
time prior to, or within nine months after, the termination of this
Agreement (unless this Agreement is terminated pursuant to Section 8.1(a) or
Section 8.1(b)(v)), the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or an agreement
in principle with respect to any Acquisition Proposal;
(ii) any Third Party shall have become the Beneficial Owner of at least
15% of the outstanding Company Shares or shall have acquired, directly or
indirectly, at least 15% of the assets of the Company and its subsidiaries;
(iii) there shall have been a willful and material breach or failure to
perform in any material respect by the Company of any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise to the
failure of a condition set forth in subclause (e) or (f) of clause (5) of
Annex A, and (B) is incapable of being or has not been cured by the Company
prior to or on the earlier of (x) the date which is 10 business days
immediately following written notice by Parent to the Company of such breach
or failure to perform and (y) the expiration or termination of the Offer in
accordance with the terms of this Agreement;
(iv) the Company has provided Parent with a Subsequent Determination
Notice or the Board of Directors of the Company (or any committee thereof)
(A) shall have made a Subsequent Determination, (B) shall fail to include in
the Schedule 14D-9 its Recommendations without modification or qualification
in a manner adverse to Parent, (C) shall fail to reaffirm such
Recommendations within two business days upon Parent's reasonable request to
do so, or (D) shall have resolved to, or publicly announced an intention to,
take any of the actions or omit to take any action as specified in this
Section 8.3(a)(iv);
(v) as of the final expiration date of the Offer, all conditions to the
consummation of the Offer shall have been met or waived except for
satisfaction of the Minimum Condition and there shall have been made
subsequent to the date of this Agreement an Acquisition Proposal; or
(vi) there shall have been a change in the constitution of the Board of
Directors of the Company not provided for in this Agreement such that at
least a majority of the members of the Board of Directors is comprised of
individuals not serving on the Board of Directors as of the date hereof.
(b) Except as set forth in this Section 8.3 or Section 6.6(d) hereof, all
fees and expenses incurred in connection with the Offer and the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Offer or the
Merger is consummated. Except for fees payable to the Exchange Agent which will
be paid with funds furnished by and originating with the Company, the Company
covenants and agrees that it will not pay or reimburse either of the
Shareholders for any fees or expenses incurred by such Shareholder in
connection with his Shareholder Agreement or the transactions contemplated by
such Shareholder Agreement, or in his capacity as Shareholder in connection
with this Agreement or the Offer, the Merger, or the other transactions
contemplated by this Agreement.
(c) Parent and Merger Sub expressly acknowledge and agree that, except in
the event of a willful and material breach of this Agreement by the Company,
with respect to any termination of this Agreement pursuant to which Parent is
paid the Liquidated Amount, (i) the payment of the Liquidated Amount shall
constitute liquidated damages with respect to any and all claims for damages
and any and all other claims which Parent or Merger Sub may be entitled to
assert against the Company, its subsidiaries or any of their respective
Representatives with respect to a breach of this Agreement (collectively,
"Termination Damages"), and (ii) the right to receive payment of the Liquidated
Amount shall constitute the sole and exclusive remedy available to Parent and
Merger Sub for any and all Termination Damages. The parties hereto expressly
acknowledge and agree that, because of the difficulty of accurately determining
the actual amount of the Termination Damages, if any, provided there has not
been a willful and material breach of this Agreement by the Company, the right
to payment of the Liquidated Amount (x) shall constitute a reasonable estimate
of the Termination Damages that will be suffered by reason of any such proposed
or actual termination of this Agreement, and (y) shall be in full
36
and complete satisfaction of any and all damages arising as a result of or with
respect to the Termination Damages. Except for nonpayment of the Liquidated
Amount or a willful and material breach of this Agreement by the Company, in no
event shall Parent or the Merger Sub be entitled to seek or to obtain any
recovery or judgment, or other damages of any kind, including, consequential,
indirect or punitive damages, against the Company, its subsidiaries or any of
their respective Representatives in respect of any proposed or actual
termination of this Agreement with respect to which Parent is paid Liquidated
Amount, including, without limitation, consequential, indirect or punitive
damages.
(d) Parent and the Company agree that the agreements contained in Sections
8.3(a) and 8.3(b) hereof are an integeral part of the transactions contemplated
by this Agreement and constitute liquidated damages and not a penalty. In the
event of any dispute as to whether any fee due under either Section 8.3(a) or
8.3(b) is due and payable, the prevailing party shall be entitled to receive
from the other party the costs and expenses (including legal fees and expenses)
in connection with any action, including the filing of any lawsuit or toher
legal action, relating to such dispute. Interest shall be paid on the amount of
any unpaid fee at the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company, Parent
and Merger Sub.
Section 9.2. Waiver of Compliance; Consents. Any failure of the Company on
the one hand, or Parent and Merger Sub on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 9.2.
Section 9.3. Survival. The respective representations, warranties,
covenants and agreements of the Company and Parent contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time, except for those covenants contained in
Sections 3.3, 3.4, 3.5, 3.6, 3.9, 6.11, 6.15, 6.16, 9.1 and 9.15 hereof, which
shall survive beyond the Effective Time in accordance with their terms.
Section 9.4. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by facsimile, receipt confirmed, when received if sent by overnight
courier or registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) if to the Company, to:
Motor Cargo Industries, Inc.
845 West Center Street
North Salt Lake City, Utah 84054
Attention: Marvin L. Friedland
Telecopy: (801) 299-5225
37
with a copy to (but which shall not constitute notice to the
Company):
Stoel Rives LLP
201 South Main Street
Salt Lake City, Utah 84111-4904
Attention: Reed W. Topham
Brent J. Giauque
Telecopy: (801) 578-6999
(ii) if to Parent or Merger Sub, to:
Union Pacific Corporation
1416 Dodge Street, Room 1230
Omaha, Nebraska 68179
Attention: Carl W. von Bernuth
Telecopy: (401) 271-6633
with a copy to (but which shall not constitute notice to Parent):
Overnite Transportation Company
1000 Semmes Avenue
P.O. Box 1216
Richmond, Virginia 23224
Attention: Pat Hanley
Telecopy: (804) 231-8312
with a copy to (but which shall not constitute notice to Parent
or Merger Sub):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Paul T. Schnell, Esq.
Richard J. Grossman, Esq.
Telecopy: (212) 735-2000
Section 9.5. Binding Effect; Permitted Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto prior to the Effective Time without
the prior written consent of the other parties hereto, which consent may be
withheld in the sole and absolute discretion of the party requested to consent.
Section 9.6. Governing Law. 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 internal laws of, the State of Utah, without regard to the
conflict of laws rules thereof.
Section 9.7. Submission to Jurisdiction; Waivers. Each of the Company,
Parent and Merger Sub irrevocably and unconditionally agrees that any legal
action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by the other party hereto
or its successors or assigns may be brought and determined in the federal and
state courts located in Salt Lake City, Utah and each of the Company, Parent
and Merger Sub hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the
38
aforesaid courts. Each of the Company, Parent and Merger Sub hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to lawfully serve
process, (b) that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts.
Section 9.8. WAIVER OF JURY TRIAL. EACH OF PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 9.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which together be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.10. Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act), (ii) unless otherwise specified herein,
the term "affiliate," with respect to any person, shall mean and include any
person controlling, controlled by or under common control with such person,
(iii) the term "subsidiary" of any specified person shall mean any corporation
any of the outstanding voting power of which, or any partnership, joint
venture, limited liability company or other entity any of the total equity
interest of which, is directly or indirectly owned by such specified person,
other than in any such case any entity which may be deemed to be a "subsidiary"
of such specified person solely by reason of the ownership of equity securities
of such entity which are registered under the Exchange Act and held by such
specified person for investment purposes only, (iv) a matter will be deemed to
be "material" hereunder with respect to any person or entity if such matter,
individually or in the aggregate, would be considered significant by a
reasonable investor in such entity in the context of the particular provision
in which the word "material" appears (i.e., a matter need not have a Company
Material Adverse Effect or a Parent Material Adverse Effect in order to be
deemed to be "material"), (v) the term "knowledge," when used with respect to
the Company, shall mean the knowledge of the directors and officers of the
Company and, when used with respect to Parent, shall mean the knowledge of the
directors and officers of Parent, and (vi) the term "including" shall mean
"including, without limitation".
Section 9.11. Entire Agreement. This Agreement, the Shareholder Agreements
and the documents or instruments referred to herein and therein, including
Annex A, the Exhibit(s) attached hereto and the Disclosure Schedule referred to
herein, which Exhibit(s) and Disclosure Schedule are incorporated herein by
reference, and any other written agreement entered into contemporaneously
herewith embody the entire agreement and understanding of the parties hereto in
respect of the subject matter contained therein. There are no restrictions,
promises, representations, warranties, covenants, or undertakings, other than
those expressly set forth or referred to therein. This Agreement and such other
agreements supersede all prior agreements and the understandings between the
parties with respect to such subject matter.
Section 9.12. Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable in a jurisdiction, such provision
shall be modified or deleted, as to the jurisdiction involved, only to the
extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
39
Section 9.13. Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any person or entity that is
not a party hereto or thereto or a successor or permitted assign of such a
party; provided, however, that the parties hereto specifically acknowledge that
the provisions of Section 6.12 hereof are intended to be for the benefit of,
and shall be enforceable by, all current or former directors, officers and
employees of the Company and its subsidiaries (in all of their capacities)
affected thereby.
Section 9.14. Disclosure Schedule. The Company and Parent acknowledge that
the Disclosure Schedule (i) relates to certain matters concerning the
disclosures required and transactions contemplated by this Agreement, (ii) is
qualified in its entirety by reference to specific provisions of this Agreement
and (iii) is not intended to constitute and shall not be construed as
indicating that such matter is required to be disclosed, nor shall such
disclosure be construed as an admission that such information is material with
respect to the Company, except to the extent required by this Agreement.
40
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement and
Plan of Merger to be signed and delivered by its respective duly authorized
officers as of the date first above written.
MOTOR CARGO INDUSTRIES, INC.
By: /S/ HAROLD R. TATE
----------------------------------
Name: Harold R. Tate
Title: Chairman and Chief
Executive Officer
UNION PACIFIC CORPORATION
By: /S/ CARL W. VON BERNUTH
----------------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President,
General
Counsel and Secretary
MOTOR MERGER CO.
By: /S/ CARL W. VON BERNUTH
----------------------------------
Name: Carl W. von Bernuth
Title: Vice President and
Secretary
ANNEX A
Conditions of the Offer
Notwithstanding any other provision of the Offer, subject to the terms of
the Agreement, Parent shall not be required to accept for exchange or exchange
or deliver any Exchange Offer Consideration for, (subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange
Act (relating to Parent's obligation to pay for or return tendered Company
Shares after the termination or withdrawal of the Offer)) any Company Shares
tendered, if by the expiration of the Offer (as it may be extended in
accordance with the requirements of Section 2.1), (1) there shall not have been
validly tendered in accordance with the Offer and not withdrawn prior to the
expiration of the Offer such number of Company Shares that, together with the
Company Shares owned by Parent and Merger Sub on the date hereof, would
constitute at least 66 2/3% of the Company Shares on a fully-diluted basis
(including, for purposes of such calculation, all Company Shares issuable upon
exercise of all Company Options, and the conversion or exchange of all
securities convertible or exchangeable into Company Shares) outstanding at the
expiration date of the Offer (including any extension thereof) (the "Minimum
Condition"), (2) the applicable waiting period under the HSR Act and any other
applicable Antitrust Laws shall not have expired or been terminated, (3) the
Offer Registration Statement shall not have become effective under the
Securities Act or shall be the subject of any stop order or proceedings seeking
a stop order, (4) the Parent Common Stock to be issued in the Offer shall not
have been approved for listing on the NYSE, subject to official notice of
issuance, or (5) at any time on or after the date of the Agreement and prior to
the acceptance for exchange of Company Shares pursuant to the Offer, any of the
following conditions exist:
(a) there shall have been entered, enforced, instituted, pending,
threatened, or issued by any Governmental Authority, any judgment, order,
injunction, ruling, proceeding, action, suit, charge or decree:
(i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit or make materially
more costly the making of the Offer, the acceptance for exchange of, or the
exchange or delivery of Exchange Offer Consideration for, some of or all the
Company Shares by Parent or the consummation by Parent or Merger Sub of the
Merger,
(ii) seeking to obtain material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Agreement, the
Offer or the Merger,
(iii) seeking to limit, restrain or prohibit Parent's or Merger Sub's
ownership or operation (or that of their respective subsidiaries or
affiliates) of all or any portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or of Parent and its subsidiaries,
taken as a whole, or to compel Parent or any of its subsidiaries or
affiliates to dispose of or hold separate all or any portion of the business
or assets of the Company and its subsidiaries, taken as a whole, or of
Parent and its subsidiaries, taken as a whole,
(iv) seeking to impose or confirm limitations on the ability of Parent
or any of its subsidiaries or affiliates effectively to exercise full rights
of ownership of any Company Shares, including the right to vote any Company
Shares to be acquired pursuant to the Offer or owned by Parent or any of its
subsidiaries or affiliates on all matters presented to the Company's
shareholders (including the approval and adoption of the Agreement and the
Merger), or seeking to require divestiture by Parent or any of its
subsidiaries or affiliates of any Company Shares, or
(vi) which otherwise has, or would reasonably be expected to have, a
Company Material Adverse Effect or a Parent Material Adverse Effect; or
(b) there shall have been any action taken, or any statute, rule,
regulation, judgment, order, legislation or interpretation of any nature
pending, proposed, enacted, enforced, promulgated, amended or issued by any
Governmental Authority or deemed by any Governmental Authority applicable to
(i) Parent, the Company or any subsidiary or affiliate of Parent or the Company
or (ii) any transaction contemplated by the Agreement, which in the judgment of
Parent is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above; or
(c) there shall have occurred or exist any facts, changes, events or
effects that have, or would reasonably expected to have, a Company Material
Adverse Effect; or
A-1
(d) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange or the
Nasdaq National Market other than (x) a shortening of trading hours or any
coordinated trading halt triggered solely as a result of a specified increase
or decrease in a market index or (y) a suspension of not more than twenty-four
hours solely relating to a bomb threat or other substantially similar threat
directed to the New York Stock Exchange or the Nasdaq National Market, (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation (whether or not mandatory) on
the extension of credit by banks or other lending institutions in the United
States, (iv) the commencement of a war, armed hostilities or any other
international or national calamity involving the United States or (v) in the
case of any of the foregoing existing at the time of the commencement of the
Offer, an acceleration or a worsening thereof; or
(e) the Company shall have failed to perform in any material respect any
obligation under the Agreement or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it
under the Agreement; or
(f) the representations and warranties of the Company set forth in the
Agreement that are qualified as to materiality shall not be true and correct as
so qualified in all respects as of the date of the Agreement and as of the
expiration of the Offer (including any extension thereof) (except to the extent
expressly made as of an earlier date, in which case as of such date), or any of
the representations and warranties set forth in the Agreement that are not so
qualified shall not be true and correct in any material respect as of the date
of the Agreement and as of the expiration of the Offer (including any extension
thereof) (except to the extent expressly made as of an earlier date, in which
case as of such date) (it being understood that, for purposes of determining
the accuracy of such representations and warranties, any update of or
modification to the Disclosure Schedule made or purported to have been made
after the date of the Agreement shall be disregarded); or
(g) this Agreement shall have been terminated in accordance with its terms;
or
(h) the Board of Directors of the Company (or any committee thereof) shall
have made a Subsequent Determination; or
(i) any Third Party shall have become the Beneficial Owner of at least 15%
of the outstanding Company Shares or shall have acquired, directly or
indirectly, at least 15% of the assets of the Company and its subsidiaries; or
(j) Parent and the Company shall have agreed that Parent shall terminate
the Offer or postpone the acceptance for payment of or payment for Company
Shares thereunder; or
(k) any party shall have breached a Shareholder Agreement; or
(l) any one or more of the representations and warranties contained in
Section 4.3 of the Agreement shall have been breached in any respect or are
inaccurate in any respect;
which, in the good faith judgment of Parent in any such case, and regardless of
the circumstances (including any action or omission by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for exchange or exchange.
The foregoing conditions are for the sole benefit of Parent and may be
asserted by Parent regardless of the circumstances (including any action or
omission by Parent or any of its affiliates) giving rise to any such condition
or may, subject to the terms of this Agreement, be waived by Parent in whole at
any time or in part from time to time. The failure by Parent at any time to
exercise its rights under any of the foregoing conditions shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances, and each such right shall be deemed an
ongoing right which may be asserted at any time or from time to time. Terms
used but not defined herein shall have the meaning assigned to such terms in
the Agreement to which this Annex A is a part.
A-2
ANNEX D
UTAH REVISED BUSINESS CORPORATION ACT
PART 13. DISSENTERS' RIGHTS
16-10a-1301. Definitions. For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when
and in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the Effective Time of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302. Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him in the event
of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors so provides.
D-1
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution of
the board of directors, and subject to the limitations set forth in Subsection
(4), a shareholder is not entitled to dissent and obtain payment under
Subsection (1) of the fair value of the shares of any class or series of shares
which either were listed on a national securities exchange registered under the
federal Securities Exchange Act of 1934, as amended, or on the National Market
System of the National Association of Securities Dealers Automated Quotation
System, or were held of record by more than 2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the Effective Time of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the Effective Time of the plan of
merger or share exchange either will be listed on a national securities
exchange registered under the federal Securities Exchange Act of 1934, as
amended, or on the National Market System of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by
more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash
in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if the shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation
to receive written notice which states the dissent and the name and address of
each person on whose behalf dissenters' rights are being asserted. The rights
of a partial dissenter under this subsection are determined as if the shares as
to which the shareholder dissents and the other shares held of record by him
were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of
which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders,
each beneficial shareholder must certify to the corporation that both he and
the record shareholders of all shares owned beneficially by him have asserted,
or will timely assert, dissenters' rights as to all the shares unlimited on the
ability to exercise dissenters' rights. The certification requirement must be
stated in the dissenters' notice given pursuant to Section 16-10a-1322.
D-2
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the
meeting. The notice shall state that shareholders are or may be entitled to
assert dissenters' rights under this part. The notice must be accompanied by a
copy of this part and the materials, if any, that under this chapter are
required to be given the shareholders entitled to vote on the proposed action
at the meeting. Failure to give notice as required by this subsection does not
affect any action taken at the shareholders' meeting for which the notice was
to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to
execute a written consent to the action contemplated by Section 16-10a-704 must
be accompanied or preceded by a written notice stating that shareholders are or
may be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting.
Failure to give written notice as provided by this subsection does not affect
any action taken pursuant to Section 16-10a-704 for which the notice was to
have been given.
16-10a-1321. Demand for payment--Eligibility and notice of intent.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed
action is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the Effective Time of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the Effective Time of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the Effective
Time or proposed Effective Time of the corporate action;
D-3
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must be
deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice required
by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice described in Section
16-10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, in accordance with the terms of the dissenters'
notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described
in Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he asserts dissenters' rights acquired beneficial ownership of
the shares before the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the Effective Time of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for
the shares after the Effective Time of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice,
is not entitled to payment for shares under this part.
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
D-4
16-10a-1325. Payment.
(1) Except as provided in Section 16-10a-1327, upon the later of the
Effective Time of the corporate action creating dissenters' rights under
Section 16-10a-1302, and receipt by the corporation of each payment demand
pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenter's shares, plus
interest to each dissenter who has complied with Section 16-10a-1323, and who
meets the requirements of Section 16-10a-1321, and who has not yet received
payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than
16 months before the date of payment; (B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily
provides such statements to shareholders; and (D) the latest available
interim financial statements, if any; (ii) the balance sheet and statements
referred to in Subsection (i) must be audited if the corporation customarily
provides audited financial statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under Section
16-10a-1328; and
(d) a copy of this part.
16-10a-1326. Failure to take action.
(1) If the Effective Time of the corporate action creating dissenters'
rights under Section 16-10a-1302 does not occur within 60 days after the date
set by the corporation as the date by which the corporation must receive
payment demands as provided in Section 16-10a-1322, the corporation shall
return all deposited certificates and release the transfer restrictions imposed
on uncertificated shares, and all shareholders who submitted a demand for
payment pursuant to Section 16-10a-1323 shall thereafter have all rights of a
shareholder as if no demand for payment had been made.
(2) If the Effective Time of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10a-1327. Special provisions relating to shares acquired after
announcement of proposed corporate action.
(1) A corporation may, with the dissenters' notice given pursuant to
Section 16-10a-1322, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302 and state that a shareholder who
asserts dissenters' rights must certify in writing, in or with the payment
demand, whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before that date. With
respect to any dissenter who does not certify in writing, in or with the
payment demand that he or the person on whose behalf the dissenters' rights are
being asserted, acquired beneficial ownership of the shares before that date,
the corporation may, in lieu of making the payment provided in Section 16-10a
-1325, offer to make payment if the dissenter agrees to accept it in full
satisfaction of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
D-5
16-10a-1328. Procedure for shareholder dissatisfied with payment or offer.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate
of the fair value of his shares and demand payment of the estimated amount,
plus interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section
16-10a-1325 or offered under Section 16-10a-1327 is less than the fair value
of the shares;
(b) the corporation fails to make payment under Section 16-10a-1325
within 60 days after the date set by the corporation as the date by which it
must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section
unless he causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for his shares.
16-10a-1330. Judicial appraisal of shares--Court action.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties
to the proceeding commenced under Subsection (2) as an action against their
shares. All such dissenters who are named as parties must be served with a copy
of the petition. Service on each dissenter may be by registered or certified
mail to the address stated in his payment demand made pursuant to Section
16-10a-1328. If no address is stated in the payment demand, service may be made
at the address stated in the payment demand given pursuant to Section
16-10a-1323. If no address is stated in the payment demand, service may be made
at the address shown on the corporation's current record of shareholders for
the record shareholder holding the dissenter's shares. Service may also be made
otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under Section
16-10a-1327.
D-6
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under Section
16-10a-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
D-7
SIGNATURES
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Dated: January 16, 2001
UNION PACIFIC CORPORATION
By: /S/ CARL W. VON BERNUTH
-----------------------------
Name: Carl W. von Bernuth, Esq.
Title: Senior Vice President,General
Counsel and Secretary
MOTOR MERGER CO.
By: /S/ CARL W. VON BERNUTH
-----------------------------
Name: Carl W. von Bernuth, Esq.
Title: Vice President and Secretary
MOTOR CARGO INDUSTRIES, INC.
By: /S/ MARVIN L. FRIEDLAND
-----------------------------
Name: Marvin L. Friedland
Title: Vice President, General
Counsel
and Secretary
8