As filed with the Securities and Exchange Commission on October 31, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNION PACIFIC CORPORATION
(Exact name of Registrant as specified in its charter)
Utah 4011 13-2626465
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Number) Identification No.)
1416 Dodge Street
Omaha, Nebraska 68179
(402) 271-5777
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
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Copies to:
Paul Schnell, Esq. Brent J. Giauque, Esq.
Richard J. Grossman, Esq. Reed W. Topham, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Stoel Rives LLP
Four Times Square 201 South Main Street
New York, New York 10036 Salt Lake City, Utah 84111
Telephone: (212) 735-3000 Telephone: (801) 328-3131
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement is declared effective and upon
completion of the transactions described in this preliminary prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Amount To Offering Price Aggregate Offering Registration
Title of Each Class of Securities to be Registered(1) Be Registered(2) Per Unit(3) Price(3) Fee(4)
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Common stock, par value $2.50 per share........... 1,774,121 Not Applicable $88,160,136.80 $22,040.03
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(1)This Registration Statement registers shares of common stock, par value
$2.50 per share, of Union Pacific Corporation exchangeable for shares of
common stock, no par value, of Motor Cargo Industries, Inc. in the exchange
offer by Union Pacific for all of the outstanding shares of common stock of
Motor Cargo.
(2)The number of shares to be registered is equal to the maximum number of
shares of common stock of Motor Cargo expected to be exchanged for shares of
common stock of Union Pacific, including shares issuable upon exercise of
Motor Cargo employee stock options, or otherwise expected to be issued on or
before the completion of the offer, multiplied by the exchange ratio of 0.26
of a share of Union Pacific common stock.
(3)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act. The
registration fee was computed pursuant to Rules 457(c) and 457(f) under the
Securities Act based on the aggregate market value of the shares of common
stock of Motor Cargo expected to be exchanged in the offer and the merger
and computed by multiplying (A) 12.92, the average of the high and low sales
prices per share of Motor Cargo common stock on October 25, 2001 on the
Nasdaq National Market and (B) 6,823,540, representing the maximum number of
shares of common stock of Motor Cargo, including shares issuable upon
exercise of Motor Cargo employee stock options.
(4)Calculated by multiplying 0.000250 by the proposed maximum aggregate
offering price.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this preliminary prospectus may be changed. We may not sell
these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
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 preliminary
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
preliminary 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 preliminary 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 preliminary prospectus or determined if this preliminary 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 preliminary prospectus is October 31, 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 83.
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 make 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.......................................... 6
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....................................................................................... 44
Additional Agreements........................................................................... 50
Conditions of the Offer......................................................................... 50
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Page
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Conditions to the Merger................................................................ 50
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
Recent Developments..................................................................... 58
Additional Information.................................................................. 59
INFORMATION ABOUT MOTOR CARGO.............................................................. 60
Motor Cargo............................................................................. 60
MOTOR CARGO'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................................... 61
Introduction............................................................................ 61
Results Of Operations................................................................... 61
Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000. 61
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000... 62
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999................... 64
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998................... 65
Liquidity and Capital Resources......................................................... 65
Inflation............................................................................... 66
Seasonality............................................................................. 66
Motor Cargo's Cautionary Statement for Forward-Looking Statements....................... 66
Additional Information.................................................................. 67
DESCRIPTION OF UNION PACIFIC CAPITAL STOCK................................................. 68
General................................................................................. 68
Transactions With Ten Percent Shareholders.............................................. 68
Common Stock............................................................................ 68
Preferred Stock......................................................................... 69
COMPARISON OF SHAREHOLDER RIGHTS........................................................... 73
LEGAL MATTERS.............................................................................. 83
EXPERTS.................................................................................... 83
WHERE YOU CAN FIND MORE INFORMATION........................................................ 83
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 preliminary 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 preliminary
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.
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 a dividend is declared by our board of directors
and your shares are accepted in the offer prior to the scheduled record date,
which is anticipated to be 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 is being mailed to Motor Cargo shareholders
with this 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 is being mailed to
the Motor Cargo shareholders with this 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 preliminary 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
preliminary 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 preliminary
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.
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 on the cover page regarding this 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
has not commenced?
A: No. Completion of this preliminary prospectus and effectiveness of the
registration statement are not necessary for the offer to commence. We cannot,
however, accept for exchange any shares tendered in the offer until the
registration statement is declared effective by the Securities and Exchange
Commission and the other conditions to our offer have been satisfied or waived.
The offer will commence when we mail this preliminary prospectus and the
related letter of election and transmittal to Motor Cargo shareholders.
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 preliminary 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 83.
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 preliminary 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 83.
Information About Union Pacific and Motor Cargo (See pages 58 and 60)
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 preliminary 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.
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 preliminary
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.
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.
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
6
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
October 29, 2001, the last full trading day prior to the printing of this
preliminary prospectus. Shareholders are urged to obtain current market
quotations for the Union Pacific and Motor Cargo common stock.
Union Pacific Motor Cargo
Common Stock Common Stock
------------- ------------
October 15, 2001 $48.02 $ 9.95
October 29, 2001 $50.25 $13.05
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 preliminary prospectus. The
financial data as of June 30, 2001 and 2000, and for each of the six-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 Six Months
Ended June 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................. $ 5,941 $ 5,872 $11,878 $11,237 $10,514 $11,079 $ 8,786
Operating Income (Loss)........... 933 994 1,903 1,804 (171) 1,144 1,432
Income (Loss) (d)................. 424 429 842 783 (633) 432 733
Net Income (Loss)................. 424 429 842 810 (633) 432 904
Per Share--Basic:
Income (Loss) (d).............. 1.71 1.74 3.42 3.17 (2.57) 1.76 3.38
Net Income (Loss).............. 1.71 1.74 3.42 3.28 (2.57) 1.76 4.17
Per Share--Diluted:
Income (Loss) (d).............. 1.67 1.70 3.34 3.12 (2.57) 1.74 3.36
Net Income (Loss).............. 1.67 1.70 3.34 3.22 (2.57) 1.74 4.14
Dividends Per Share............... 0.40 0.40 0.80 0.80 0.80 1.72 1.72
Operating Cash Flow............... 843 1,034 1,958 1,869 565 1,600 1,657
------- ------- ------- ------- ------- ------- -------
At Period End
Total Assets...................... $30,991 $30,202 $30,499 $29,888 $29,374 $28,860 $27,990
Total Debt........................ 8,499 8,571 8,351 8,640 8,692 8,518 8,027
Common Shareholders' Equity....... 9,033 8,339 8,662 8,001 7,393 8,225 8,225
------- ------- ------- ------- ------- ------- -------
Additional Data
Average Employees................. 60,600 62,000 61,800 64,200 65,100 65,600 54,800
Revenues Per Employee (000)....... $ 98.04 $ 94.71 $ 192.2 $ 175.0 $ 161.5 $ 168.9 $ 160.3
Equity Per Common Share........... 36.38 33.65 35.09 32.29 29.88 33.30 33.35
Rail Commodity Revenue............ 5,146 5,065 10,270 9,851 9,072 9,712 7,419
Trucking Revenue.................. 570 552 1,113 1,062 1,034 946 961
Rail Carloads (000)............... 4,390 4,387 8,901 8,556 7,998 8,453 6,632
Trucking Shipments (000).......... 3,899 3,765 7,495 7,708 7,789 7,506 8,223
Rail Operating Ratio (%).......... 83.1 81.6 82.3 82.0 95.4 87.4 79.1
Trucking Operating Ratio (%) (e).. 95.8 96.9 95.2 98.1 94.8 96.8 104.9
------- ------- ------- ------- ------- ------- -------
Financial Ratios
Debt to Capital Employed.......... 44.7% 46.6% 45.1% 47.6% 49.4% 50.9% 49.4%
Return on Equity (f).............. 4.8% 5.3% 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.
See "Information About Union Pacific--Recent Developments" on page 58 for a
discussion of Union Pacific's third quarter results.
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 October 29, 2001). 51.95 44.60 -- (a) 13.40 9.30
--------
(a)Union Pacific anticipates that the board of directors will declare a
dividend for holders of record as of December 12, 2001 at Union Pacific's
board of directors meeting scheduled for 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
. October 29, 2001, the last full trading day prior to the printing of this
preliminary prospectus.
Union Pacific Motor Cargo
Common Stock Common Stock
------------- ------------
October 15, 2001 $48.02 $ 9.95
October 29, 2001 $50.25 $13.05
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. 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. 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 preliminary 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 preliminary 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. 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 is
being mailed to the shareholders of Motor Cargo with this preliminary
prospectus and is incorporated by reference into this preliminary prospectus.
Morgan Keegan's opinion is attached as Annex II to Motor Cargo's Schedule 14D-9
and is incorporated by reference into this preliminary 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 preliminary 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 preliminary 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;
23
. $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 this 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 preliminary 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
25
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 31, 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 preliminary 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 31, 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 preliminary 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. 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 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 tax opinion if:
. as expected, the proposed forward merger occurs in the ordinary course
after completion of the offer;
. 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 tax opinion is not a condition to completing the offer or the merger. If
Union Pacific obtains the 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 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 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 preliminary 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. The offer is also subject to the conditions
that, at the time of acceptance for exchange of shares of Motor Cargo common
stock pursuant to the offer:
. 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, orto 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;
--adeclaration of a banking moratorium or any suspension of payments in
respect of banks in the United States;
--anylimitation (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
preliminary 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 is being mailed to the shareholders of Motor Cargo with this 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 Motor Cargo, 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 preliminary 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
preliminary 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.
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.
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 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
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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;
. 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;
43
. information provided for inclusion in the Schedule 14D-9 and this
preliminary 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.
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
44
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;
. 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;
45
. 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 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
46
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 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.
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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";
. 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.
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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
preliminary 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.
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;
49
. 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.
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;
50
. 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;
(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
51
(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";
--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
52
. 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.
Recent Developments
On October 18, 2001, Union Pacific announced the following results for the
third quarter ended September 30, 2001: Union Pacific reported net income for
the third quarter of $267 million, or $1.04 per diluted share. This is an
increase of 4 percent compared to net income of $256 million, or $1.00 per
diluted share, in the third quarter of 2000.
Union Pacific, excluding Overnite, reported operating income for the third
quarter of $556 million compared to $550 million for the same period in 2000.
Union Pacific Railroad's commodity revenue for the third quarter declined
modestly to $2.63 billion for the quarter from $2.65 billion, as carloads were
off 1 percent. Revenue from energy transportation continued its record-setting
performance with 4 percent growth year-over-year, while industrial products
rebounded during the third quarter with a 3 percent gain. The other commodities
all experienced revenue declines during the quarter with automotive down 10
percent, chemicals down 5 percent, agricultural down 2 percent and intermodal
down 1 percent.
The operating ratio improved by 0.4 percentage points to the best quarterly
performance since 1996 at 79.7 percent from 80.1 percent in third quarter 2000.
Record levels of employee productivity and other cost control measures,
combined with moderating fuel prices were key contributors to the improved
performance.
Overnite reported third quarter operating income of $18.3 million compared
to $19.6 million in the third quarter of 2000. Operating revenues increased 2
percent to $292 million from $287 million. Overnite's operating ratio increased
0.5 percentage points to 93.7 percent.
For the first nine months of 2001, Union Pacific reported operating income
of $1.5 billion and net income of $691 million compared to operating income of
$1.6 billion and net income of $685 million for the same period in 2000.
58
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
preliminary 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 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 83.
59
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.
60
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 66.
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.
61
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
62
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%
===== ===== =====
63
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.
64
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.
65
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
66
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 preliminary
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 preliminary 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
preliminary 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 83.
67
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 83.
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.
68
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;
69
. 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.
70
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;
71
. 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.
72
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 preliminary
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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73
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
---------------------------------------------------------------------------------------------------------------
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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74
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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.
----------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------
75
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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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76
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
-----------------------------------------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------------------------------------
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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77
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
------------------------------------------------------------------------------------------------------
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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78
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
--------------------------------------------------------------------------------
(2)all of the following conditions shall
have been met:
. 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
--------------------------------------------------------------------------------
79
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
-------------------------------------------------------------------------------
would be entitled in the event of
any voluntary or involuntary
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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80
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
-----------------------------------------------------------------------------------------------------------
(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.
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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.
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81
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Motor Cargo Shareholder Rights Union Pacific Shareholder Rights
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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.
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82
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.
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 preliminary 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 preliminary
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 preliminary prospectus is a part of that registration statement. As
allowed by SEC rules, this preliminary 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.
The SEC allows us to "incorporate by reference" information into this
preliminary 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 preliminary
prospectus, except for
83
any information superseded by information contained directly in this
preliminary prospectus. This preliminary 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
------------------------- ------
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 preliminary 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
be 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 preliminary prospectus or in any of the materials that we
have incorporated by reference into this preliminary 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.
84
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
preliminary 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
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Union Pacific Corporation is a Utah corporation. Section 16-10a-901 et. seq.
of the Utah Revised Business Corporation Act grants to a corporation the power
to indemnify a person made a party to a lawsuit or other proceeding because
such person is or was a director or officer. A corporation is further empowered
to purchase insurance on behalf of any person who is or was a director or
officer against any liability asserted against him or her and incurred by him
or her in such capacity or arising out of his or her status as such capacity.
Union Pacific's Bylaws provide for mandatory indemnification of its directors,
officers and employees in certain circumstances. Union Pacific maintains
insurance on behalf of directors and officers against liability asserted
against them arising out of their status as such.
Union Pacific's Revised Articles of Incorporation, incorporated herein as
Exhibit 3.1 to this Registration Statement, eliminate in certain circumstances
the personal liability of directors of Union Pacific for monetary damages for a
breach of their fiduciary duty as directors. This provision does not eliminate
the liability of a director for (i) the amount of a financial benefit received
by a director to which he is not entitled, (ii) an intentional infliction of
harm on the corporation or the shareholders, (iii) a violation of Section
16-10a-842 of the Revised Business Corporation Act of Utah (relating to the
liability of directors for unlawful distributions) or (iv) an intentional
violation of criminal law.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
No. Description
------- -----------
2.1 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. is incorporated herein by reference to Exhibit 2.1
to Union Pacific's Current Report on From 8-K filed on October 16, 2001.
3.1 Revised Articles of Incorporation of Union Pacific, as amended through April 25, 1996, are incorporated
herein by reference to Exhibit 3 to Union Pacific's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3.2 Bylaws of Union Pacific, as amended effective as of November 19, 1998, are incorporated herein by
reference to Exhibit 3.1 to Union Pacific's Current Report on Form 8-K filed November 25, 1998.
5.1 Opinion of James J. Theisen, Esq. as to the legality of the shares being issued.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of James J. Theisen, Esq. (included in Exhibit 5.1 hereto).
24.1 Powers of Attorney.
99.1 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 Current Report on
From 8-K filed on October 16, 2001.
99.2 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 Current
Report on From 8-K filed on October 16, 2001.
99.3 Letter of Election and Transmittal.
II-1
Exhibit
No. Description
------- -----------
99.4 Notice of Guaranteed Delivery.
99.5 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.6 Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.8 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
Item 22. Undertakings.
. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
. The registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Omaha,
State of Nebraska, on October 31, 2001.
UNION PACIFIC CORPORATION
/s/ CARL W. VON BERNUTH
By: _________________________________
Name: Carl W. von Bernuth, Esq.
Title: Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ RICHARD K. DAVIDSON Chairman of the Board, President, October 31, 2001
----------------------- Chief Executive Officer and
Richard K. Davidson Director (Principal Executive
Officer)
/s/ JAMES R. YOUNG Executive Vice President-- October 31, 2001
----------------------- Finance (Principal Financial
James R. Young Officer)
/s/ RICHARD J. PUTZ Vice President and Controller October 31, 2001
----------------------- (Principal Accounting Officer)
Richard J. Putz
* Director October 31, 2001
-----------------------
Philip F. Anschutz
* Director October 31, 2001
-----------------------
E. Virgil Conway
* Director October 31, 2001
-----------------------
Thomas J. Donohue
* Director October 31, 2001
-----------------------
Archie W. Dunham
* Director October 31, 2001
-----------------------
Spencer F. Eccles
* Director October 31, 2001
-----------------------
Ivor J. Evans
II-3
Signature Title Date
--------- ----- ----
* Director October 31, 2001
----------------------------
Elbridge T. Gerry, Jr.
* Director October 31, 2001
----------------------------
Judith Richards Hope
* Director October 31, 2001
----------------------------
Richard J. Mahoney
---------------------------- Director
Stephen R. Rogel
* Director October 31, 2001
----------------------------
Richard D. Simmons
*By: /s/ THOMAS E. WHITAKER
----------------------------
Thomas E. Whitaker
Attorney-In-Fact
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EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1 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. is incorporated herein by reference to Exhibit 2.1
to Union Pacific's Current Report on From 8-K filed on October 16, 2001.
3.1 Revised Articles of Incorporation of Union Pacific, as amended through April 25, 1996, are incorporated
herein by reference to Exhibit 3 to Union Pacific's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3.2 Bylaws of Union Pacific, as amended effective as of November 19, 1998, are incorporated herein by
reference to Exhibit 3.1 to Union Pacific's Current Report on Form 8-K filed November 25, 1998.
5.1 Opinion of James J. Theisen, Esq. as to the legality of the shares being issued.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of James J. Theisen, Esq. (included in Exhibit 5.1 hereto).
24.1 Powers of Attorney.
99.1 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 Current Report on
From 8-K filed on October 16, 2001.
99.2 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 Current
Report on From 8-K filed on October 16, 2001.
99.3 Letter of Election and Transmittal.
99.4 Notice of Guaranteed Delivery.
99.5 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.6 Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.7 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.