-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TvPhoc1mLt3Msa1vKrntMa2AOUd0Se/c5aRoGq38sOhFkqiRzoUgLXb/vYow+aHQ HXMAFTc2B2O7A0ei8dyvPA== 0000950123-98-001418.txt : 19980218 0000950123-98-001418.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950123-98-001418 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19980213 SROS: NONE GROUP MEMBERS: BLACKHAWK MERGER SUB, INC. GROUP MEMBERS: CANADIAN NATIONAL RAILWAY CO SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS CENTRAL CORP CENTRAL INDEX KEY: 0000859119 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 133545405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-41121 FILM NUMBER: 98536798 BUSINESS ADDRESS: STREET 1: 455 N CITYFRONT PLZ DR STREET 2: 20TH FLOOR CITY: CHICAGO STATE: IL ZIP: 60611-5504 BUSINESS PHONE: 3127557500 MAIL ADDRESS: STREET 1: 455 NORTH CITYFRONT PLAZA DR STREET 2: 455 NORTH CITYFRONT PLAZA DR CITY: CHICAGO STATE: IL ZIP: 60611 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CANADIAN NATIONAL RAILWAY CO CENTRAL INDEX KEY: 0000016868 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 980018609 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 935 DE LA GAUCHETIERE ST W CITY: MONTREAL QUEBEC CANA STATE: A8 ZIP: 00000 BUSINESS PHONE: 5143996569 MAIL ADDRESS: STREET 1: 935 DE LA GAUCHETIERE ST WEST STREET 2: QUEBEC CANADA CITY: MONTREAL STATE: A8 ZIP: 00000 SC 14D1 1 SCHEDULE 14D1 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ ILLINOIS CENTRAL CORPORATION (EXACT NAME OF SUBJECT COMPANY) CANADIAN NATIONAL RAILWAY COMPANY BLACKHAWK MERGER SUB, INC. (BIDDERS) ------------------------ COMMON STOCK, $0.001 PAR VALUE (TITLE OF CLASS OF SECURITIES) ------------------------ 896215100 (CUSIP Number of Class of Securities) ------------------------ JEAN PIERRE OUELLET CANADIAN NATIONAL RAILWAY COMPANY 935 DE LA GAUCHETIERE ST. WEST MONTREAL, QUEBEC, CANADA H3B 2M9 (514) 399-6569 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) ------------------------ WITH COPIES TO: WINTHROP B. CONRAD, JR., ESQ. JOHN G. FINLEY, ESQ. DAVID W. FERGUSON, ESQ. ALLAN SCHWARTZ, ESQ. DAVIS POLK & WARDWELL SIMPSON, THACHER & BARTLETT 450 LEXINGTON AVENUE 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017 (212) 450-4000 (212) 455-2000
CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRANSACTION VALUATION* AMOUNT OF FILING FEE** - ---------------------------------------------------------------------------------------------- $1,796,018,679 $359,204 - ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- * Calculated by multiplying $39.00, the per share tender offer price, by 46,051,761, the number of shares of Common Stock sought in the Offer. ** Calculated as 1/50 of 1% of the transaction value. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: _________________ Filing Party: ________________________ Form or Registration No.: __________ Date Filed: _________________________ ================================================================================ 2 CUSIP NO. 896215100 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS OF ABOVE PERSONS CANADIAN NATIONAL RAILWAY COMPANY - ----------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ----------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ----------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS BK, WC - ----------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ] - ----------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION CANADA - ----------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON NONE. - ----------------------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - ----------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0% - ----------------------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO, HC
2 3 CUSIP NO. 896215100 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS OF ABOVE PERSONS BLACKHAWK MERGER SUB, INC. - ----------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ----------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ----------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ----------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ] - ----------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - ----------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON NONE. - ----------------------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - ----------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0% - ----------------------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO
3 4 This Tender Offer Statement on Schedule 14D-1 filed by Canadian National Railway Company ("Parent"), a Canadian corporation, and Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Parent, relates to the offer by Purchaser to purchase 46,051,761 of the issued and outstanding shares of Common Stock $0.001 par value (the shares subject to the Offer, as well as all other shares of such Common Stock hereinafter referred to as the "Shares"), of Illinois Central Corporation, a Delaware corporation (the "Company"), at $39.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 13, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. ITEM 1. SECURITY AND SUBJECT COMPANY (a) The name of the subject company is Illinois Central Corporation (the "Company"), a Delaware corporation, which has its principal executive offices at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504. (b) The exact title of the class of equity securities and amount being sought are 46,051,761 shares of Common Stock, $0.001 par value, of the Company. As of February 10, 1998, there were 61,402,347 Shares issued and outstanding and approximately 25,000 holders of record. The information set forth under "Introduction" in the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market is set forth in "Price Range of Shares; Dividends" of the Offer to Purchase and is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND (a)-(d) and (g) This Statement is filed by Parent and Purchaser. The information set forth under "Introduction", "Certain Information Concerning Purchaser and Parent" and Schedule I of the Offer to Purchase is incorporated herein by reference. (e) and (f) During the last five years, neither Parent nor Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed in Schedule I to the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY (a)-(b) The information set forth under "Certain Information Concerning the Company", "Certain Information Concerning Purchaser and Parent", "Background of the Offer; Past Contacts, Transactions or Negotiations with the Company", "Purpose of the Offer and Merger; Plans for the Company" and "The Merger Agreement; Other Agreements" in the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a)-(b) The information set forth under "Introduction", "Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 4 5 ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER (a)-(e) The information set forth under "Introduction", "Background of the Offer; Past Contacts, Transactions or Negotiations with the Company", "Purpose of the Offer and Merger; Plans for the Company", "The Merger Agreement; Other Agreements", "Dividends and Distributions", of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth under "Introduction" and "Effect of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY The information set forth under "Introduction", "Certain Information Concerning Purchaser and Parent" and "Merger Agreement; Other Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES The information set forth under "Introduction", "Certain Information Concerning Purchaser and Parent", "Background of the Offer; Past Contacts, Transactions or Negotiations with the Company", and "The Merger Agreement; Other Agreements" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The information set forth under "Introduction" and "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS Parent's Consolidated Financial Statements and related Notes thereto included in Parent's Form 40-F for the fiscal year ended December 31, 1996 and the information set forth under "Certain Information Concerning Purchaser and Parent" are incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION (a) Not applicable. (b) and (c) The information set forth under "Introduction", "Terms of the Offer; Proration; Expiration Date", and "Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth under "Effect of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. (e) The information set forth under "Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the related Letter of Transmittal and the Agreement and Plan of Merger, dated as of February 10, 1998, among Parent, Purchaser and the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2) and (c)(1), is incorporated herein by reference. 5 6 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS (a)(1) Offer to Purchase dated February 13, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in The Wall Street Journal on February 13, 1998. (a)(8) Text of Press Release issued by Parent and the Company on February 10, 1998. (a)(9) Text of Press Release issued by Parent on February 13, 1998. (b)(1) Commitment Letter (including the related term sheet), dated February 9, 1998, from Goldman Sachs Canada Credit Partners Co., Goldman Sachs Credit Partners L.P. and Bank of Montreal, as Lead Lenders. (c)(1) Agreement and Plan of Merger dated as of February 10, 1998 among Parent, Purchaser and the Company. (c)(2) Investment Commitment Agreement dated as of February 10, 1998 between Parent and Gilbert H. Lamphere. (c)(3) Investment Commitment Agreement dated as of February 10, 1998 between Parent and Alexander P. Lynch. (c)(4) Confidentiality Agreement, dated March 13, 1997, between Parent and the Company. (d) Not applicable. (e) Not applicable. (e) Not applicable.
6 7 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. February 13, 1998 CANADIAN NATIONAL RAILWAY COMPANY By: /s/ Jean Pierre Ouellet Name: Jean Pierre Ouellet Title: Chief Legal Officer and Corporate Secretary BLACKHAWK MERGER SUB, INC. By: /s/ Jean Pierre Ouellet Name: Jean Pierre Ouellet Title: President and Treasurer 7 8 EXHIBIT INDEX
EXHIBIT NO. ----------- (a)(1) Offer to Purchase dated February 13, 1998. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in The Wall Street Journal on February 13, 1998. (a)(8) Text of Press Release issued by Parent and the Company on February 10, 1998. (a)(9) Text of Press Release issued by Parent on February 13, 1998. (b)(1) Commitment Letter (including the related term sheet), dated February 9, 1998, from Goldman Sachs Canada Credit Partners Co., Goldman Sachs Credit Partners L.P. and Bank of Montreal, as Lead Lenders. (c)(1) Agreement and Plan of Merger dated as of February 10, 1998 among Parent, Purchaser and the Company. (c)(2) Investment Commitment Agreement dated as of February 10, 1998 between Parent and Gilbert H. Lamphere. (c)(3) Investment Commitment Agreement dated as of February 10, 1998 between Parent and Alexander P. Lynch. (c)(4) Confidentiality Agreement, dated March 13, 1997, between Parent and the Company.
8 EX-99.A.1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH 46,051,761 SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION AT $39.00 NET PER SHARE BY BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. --------------------- THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE (THE SHARES SUBJECT TO THE OFFER, AS WELL AS ALL OTHER SHARES OF COMMON STOCK HEREINAFTER REFERRED TO AS THE "SHARES") OF ILLINOIS CENTRAL CORPORATION (THE "COMPANY") WHICH, TOGETHER WITH THE SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), AND (2) THE RECEIPT BY CANADIAN NATIONAL RAILWAY COMPANY ("PARENT"), PRIOR TO THE EXPIRATION OF THE OFFER, OF A FAVORABLE INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE VOTING TRUST (AS DEFINED HEREIN) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY BY PARENT. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT DATED AS OF FEBRUARY 10, 1998 AMONG PARENT, PURCHASER AND THE COMPANY (THE "MERGER AGREEMENT") AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. --------------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal or a manually signed facsimile thereof in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 of the Letter of Transmittal and mail or deliver the Letter of Transmittal or such facsimile with the certificate(s) and any other required documents to Harris Trust Company of New York (the "Depositary") (at the Depositary's address set forth on the back cover of this Offer to Purchase) or follow the procedure for book-entry tender of Shares set forth in Section 3 or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the tender for such stockholder. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender Shares so registered. A stockholder who desires to tender Shares and whose certificates for such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions or requests for assistance may be directed to MacKenzie Partners, Inc. (the "Information Agent") or Goldman, Sachs & Co. and Schroder & Co. Inc. (sometimes referred to herein as the "Dealer Managers") at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase and the related Letter of Transmittal may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. THE DEALER MANAGERS FOR THE OFFER ARE: GOLDMAN, SACHS & CO. SCHRODER & CO. INC. The date of this Offer to Purchase is February 13, 1998. 2 TABLE OF CONTENTS
PAGE ------ INTRODUCTION............................................................................. 1 1. Terms of the Offer; Proration; Expiration Date.................................. 4 2. Acceptance for Payment and Payment for Shares................................... 5 3. Procedure for Tendering Shares.................................................. 6 4. Withdrawal Rights............................................................... 9 5. Certain Income Tax Consequences................................................. 9 6. Price Range of Shares; Dividends................................................ 10 7. Effect of the Offer on the Market for Shares; Exchange Listing and Exchange Act Registration; Margin Regulations................................................ 11 8. Certain Information Concerning the Company...................................... 12 9. Certain Information Concerning Purchaser and Parent............................. 14 10. Source and Amount of Funds...................................................... 17 11. Background of the Offer; Past Contacts, Transactions or Negotiations with the Company..................................................................... 18 12. Purpose of the Offer and Merger; Plans for the Company.......................... 21 13. The Merger Agreement; Other Agreements.......................................... 22 14. Dividends and Distributions..................................................... 37 15. Extension of Tender Period; Termination; Amendment.............................. 37 16. Certain Conditions of the Offer................................................. 38 17. Certain Legal Matters; Regulatory Approvals..................................... 39 18. Fees and Expenses............................................................... 43 19. Miscellaneous................................................................... 44 Schedule I Directors and Executive Officers of Parent and Purchaser..................... Annex A Canadian/U.S. GAAP Financial Information for 1995, 1996 and 1997.
i 3 To the Holders of Common Stock of Illinois Central Corporation: INTRODUCTION Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of Canadian National Railway Company ("Parent" or "CN"), a Canadian corporation, hereby offers to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of such Common Stock being hereinafter referred to as the "Shares"), of Illinois Central Corporation, a Delaware corporation (the "Company" or "IC"), at $39.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Upon the terms and subject to the conditions of the Offer, if more than 46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration Date, Purchaser will accept for payment and pay for only 46,051,761 Shares on a pro rata basis (with appropriate adjustments to avoid purchase of fractional Shares) based on the number of Shares properly tendered by each stockholder prior to or on the Expiration Date and not withdrawn. See Section 1. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. Parent or Purchaser will pay all charges and expenses of Goldman, Sachs & Co. and Schroder & Co. Inc. (the "Dealer Managers"), Harris Trust Company of New York (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See Section 17. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) THE RECEIPT BY PARENT, PRIOR TO THE EXPIRATION DATE OF THE OFFER, OF A FAVORABLE INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE VOTING TRUST (AS DEFINED HEREIN) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY BY PARENT. In addition, the Offer is subject to certain other conditions which are described in Section 16. Subject to the terms of the Merger Agreement, Purchaser reserves the right to waive any or all of the conditions to the Offer and to extend the Offer if any of the conditions to the Offer are not satisfied. Under certain other conditions more fully described in Section 13, Parent will, at the request of the Company, be obligated to cause Purchaser to extend the Offer for up to twenty business days. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 10, 1998 AMONG PARENT, PURCHASER AND THE COMPANY (THE "MERGER AGREEMENT") AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE COMPANY HAS ADVISED PURCHASER THAT EACH OF LEHMAN BROTHERS INC. ("LEHMAN BROTHERS") AND THE BEACON GROUP CAPITAL SERVICES LLC ("BEACON"), HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY WRITTEN OPINIONS THAT, AS OF THE DATE OF THE MERGER AGREEMENT, THE CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER, TAKEN TOGETHER, IS FAIR TO THE HOLDERS OF SHARES FROM A FINANCIAL POINT OF VIEW. A COPY OF EACH SUCH OPINION IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH. SUCH STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE BY, FACTORS CONSIDERED BY, PROCEDURES FOLLOWED BY, AND CERTAIN INFORMATION CONCERNING, LEHMAN BROTHERS AND BEACON. 4 The purpose of the Offer is for Parent, through Purchaser, to acquire a majority equity interest in the Company as the first step in a business combination of Parent and the Company. The Offer is being made pursuant to the terms of the Merger Agreement which provides that, among other things, following completion of the Offer and the satisfaction or waiver of certain conditions and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become an indirect wholly-owned subsidiary of Parent. As more fully described in Section 13, at the effective time of the Merger (the "Effective Time"), (i) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of 46,051,761 Shares, each Share outstanding immediately prior to the Effective Time (other than those Shares held by the Company as treasury stock or owned by Parent or any subsidiary of Parent) shall be converted into the right to receive that number of duly authorized, validly issued, fully paid and nonassessable shares, without par value, of Parent ("Parent Common Stock") equal to the fraction (the "Exchange Ratio") obtained by dividing $39.00 by the Parent Average Closing Price (as defined in Section 13); and (ii) if Purchaser shall have purchased an aggregate of less than 46,051,761 Shares pursuant to the Offer, each Share outstanding immediately prior to the Effective Time (other than those Shares held by the Company as treasury stock or owned by Parent or any subsidiary of Parent) shall be converted into the right to receive: (a) a number of shares of Parent Common Stock equal to the fraction obtained by dividing $39.00 by the Parent Average Closing Price, multiplied by the Stock Proration Factor (as defined in Section 13); and (b) cash in an amount equal to the product of 1 minus the Stock Proration Factor, multiplied by $39.00. THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY PARENT COMMON STOCK. SUCH AN OFFER MAY BE MADE ONLY PURSUANT TO A PROSPECTUS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). In connection with the Offer and the Merger, Parent entered into binding agreements (the "Investment Commitment Agreements") with two directors of the Company, Messrs. Gilbert H. Lamphere and Alexander P. Lynch, with respect to the Shares owned by such persons, pursuant to which Messrs. Lamphere and Lynch have each agreed (i) to permit all options to purchase Shares then owned by them to be converted into options to purchase shares of Parent Common Stock in accordance with the terms of the Merger Agreement, (ii) that at any meeting of stockholders of the Company held to adopt the Merger Agreement, they will vote all of their Shares in favor of such action and (iii) (in the case of Mr. Lamphere only) that, within 90 days of the Effective Time he will have acquired at least 98,150 shares of Parent Common Stock pursuant to the Merger or open market purchases; provided that he will not be obligated to invest an aggregate amount in excess of $5,300,000 of proceeds from the Offer and/or the Merger. See Section 13. Under Delaware law, the approval of the Company's Board and the affirmative vote of the holders of a majority of the outstanding Shares is required to adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause (through the Voting Trustee) the adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other stockholder. The Merger Agreement may be terminated by either Parent or the Company at any time prior to the Effective Time if, during any five consecutive trading day period during the period from the commencement of the Offer until the business day prior to the expiration of the Offer, the average closing price of the Parent Common Stock on the NYSE is less than $38.00. See Section 13. If the Minimum Condition has not been satisfied prior to the scheduled expiration of the Offer (as such Offer may have been extended), Purchaser shall have the right at its option to extend the Offer for a period of up to twenty business days. If, at the scheduled expiration of the Offer (as such date may have been extended by Purchaser as contemplated by the preceding sentence), the Minimum Condition has not been satisfied, then (unless the parties otherwise agree) at Parent's election either (i) Purchaser shall amend the terms of the Offer by increasing the number of shares sought in the Offer to all of the outstanding Shares, subject to certain conditions described in 2 5 Section 13, or (ii) Purchaser shall terminate the Offer and Purchaser and the Company shall proceed with the Merger, in accordance with the Merger Agreement. See Section 13. In accordance with the United States Supreme Court decision, Schwabacher v. United States, 334 U.S. 182 (1948), stockholders of the Company will not have any appraisal or like rights under state law, unless the STB or a court of competent jurisdiction determines that state-law appraisal rights are available to holders of Shares. Parent considers it unlikely that the STB or a court will determine that state law appraisal rights are available to holders of Shares. Parent and the Company intend to seek a determination of the STB that the terms of the Merger are just and reasonable. It is the understanding of Parent and the Company that upon the issuance of such a determination, dissenters' rights under state law will be prempted. Stockholders of the Company will have an opportunity to participate in this STB proceeding. Simultaneously with the purchase of Shares pursuant to the Offer, the Shares purchased will be deposited in an independent, irrevocable voting trust (the "Voting Trust") in accordance with the terms and conditions of a proposed voting trust agreement (the "Voting Trust Agreement"). See Section 13. Based on the information supplied by the Company, as of December 31, 1997, 61,402,347 Shares were issued and outstanding and employee and director stock options to purchase an aggregate of 2,564,502 Shares were outstanding. **ALL DOLLAR AMOUNTS CONTAINED HEREIN ARE IN U.S. DOLLARS UNLESS OTHERWISE INDICATED.** THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 3 6 1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and subject to the conditions set forth in the Offer, Purchaser will accept for payment and pay for an aggregate of 46,051,761 Shares that are validly tendered by the Expiration Date, as hereinafter defined, and not withdrawn as provided in Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, March 13, 1998, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Upon the terms and subject to the conditions of the Offer, if more than 46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration Date, Purchaser will accept for payment and pay for only 46,051,761 Shares on a pro rata basis (with appropriate adjustments to avoid purchase of fractional Shares) based on the number of Shares properly tendered by each stockholder prior to or on the Expiration Date and not withdrawn. In the event that proration of tendered Shares is required, because of the difficulty of determining the precise number of Shares properly tendered and not withdrawn (due in part to the guaranteed delivery procedures described in Section 3), Purchaser does not expect that it will be able to announce the final results of such proration or pay for any Shares until at least seven New York Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Stockholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their broker. The Offer is subject to certain conditions set forth in Section 16, including satisfaction of the Minimum Condition, the expiration or termination of the waiting period (if any) applicable to Purchaser's acquisition of Shares pursuant to the Offer (the "Acquisition") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the receipt by Parent, prior to the expiration of the Offer, of a favorable informal advisory opinion from the staff of the STB to the effect that the proposed use of the Voting Trust will preclude unlawful control of the Company by Parent. If any such condition is not satisfied, then, except as provided in the next paragraph, Purchaser may terminate the Offer and return all tendered Shares to tendering stockholders, extend the Offer and, subject to withdrawal rights as set forth in Section 4, retain all such Shares until the expiration of the Offer as so extended, waive such condition and, subject to any requirement to extend the period of time during which the Offer is open, purchase all Shares validly tendered by the Expiration Date and not withdrawn or delay acceptance of payment for Shares, subject to applicable law, until satisfaction or waiver of the conditions to the Offer. Purchaser expressly reserves the right to waive any of the conditions to the Offer, to extend the Offer if any conditions to the Offer are not satisfied and to make any change in the terms or conditions of the Offer. However, except as provided in the Merger Agreement, Purchaser will not make any waiver or change to the Offer which (i) increases the number of Shares sought in the Offer, (ii) changes the form of consideration to be paid or decreases the price per Share, (iii) waives the Minimum Condition, (iv) waives the conditions set forth in paragraph (a), (b) or (e) of Section 16, (v) waives the condition relating to the expiration of the waiting period (if any) under the HSR Act or the receipt of a favorable informal advisory opinion from the STB staff, (vi) is adverse to the holders of Shares or modifies any of the conditions to the Offer or (vii) imposes any conditions to the Offer in addition to those set forth in Section 16. If the Offer shall not have been consummated by its scheduled expiration due to the failure to satisfy (i) any of the conditions to the Offer set forth in paragraph (a) or (b) of Section 16, (ii) the condition to the Offer relating to the expiration of the waiting period under the HSR Act or (iii) the condition relating to the receipt of the favorable informal advisory opinion from the STB staff, Parent will, at the request of the Company, be obligated to cause Purchaser to extend the Offer for up to twenty business days. During any such 4 7 extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder's Shares. See Section 4. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment) Purchaser will accept for payment, and will pay for, an aggregate of 46,051,761 Shares which are validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in Section 16. In addition, Purchaser reserves the right, in its sole discretion and subject to applicable law, to delay the acceptance for payment of, or subject to applicable rules of the SEC, payment for, Shares in order to comply in whole or in part with any applicable law. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (A) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3; (B) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (C) any other documents required under the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. Payment for Shares accepted pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from Purchaser and transmitting payments to such tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, Purchaser's obligation to make such payment shall be satisfied and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. Purchaser will pay any stock transfer tax incident to the transfer to it of validly tendered Shares, except as otherwise provided in 5 8 Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer (including proration due to tenders of more than 46,051,761 Shares), or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser increases the consideration to be paid per Share pursuant to the Offer, Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Purchaser reserves the right to transfer or assign, in whole at any time or in part from time to time, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES. In order for a holder of Shares to tender validly Shares pursuant to the Offer, the related Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary (including an Agent's Message if the tendering stockholder has not delivered a Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, either the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at 6 9 one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Securities and Exchange Act of 1934 (the "Exchange Act") (each of the foregoing referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery If a stockholder desires to tender Shares pursuant to the Offer and the Share Certificates evidencing such stockholder's Shares are not immediately available or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered; provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received prior to the Expiration Date by the Depositary (as provided below); and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a Book-Entry Transfer, an Agent's Message and any other documents required by the Letter of Transmittal are received by the Depositary within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery made available by Purchaser. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a Book-Entry Transfer, an Agent's Message and any other documents required by the Letter of Transmittal. 7 10 Determination of Validity All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. Subject to the terms of the Merger Agreement, Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, the Dealer Managers, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the related Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements By executing the Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of the Merger Agreement). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective if, when, and only to the extent that, Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares for which the appointment is effective, be empowered (subject to the Voting Trust so long as it shall be in effect with respect to the Shares) to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares (subject to the Voting Trust). The acceptance for payment by Purchaser of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER OR CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A STOCKHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. 8 11 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after April 13, 1998. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described herein. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, 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. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, which determination shall be final and binding. None of Purchaser, Parent, the Dealer Managers, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN INCOME TAX CONSEQUENCES. The receipt of cash pursuant to the Offer will be a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and is likely to be a taxable transaction under applicable state, local or foreign income tax laws. Generally, for Federal income tax purposes, a tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer and the aggregate tax basis in the relevant Shares. It is expected that an exchange of Shares for the Stock Consideration (as defined in Section 13) and cash, if any, pursuant to the Merger Agreement will also be a taxable transaction for U.S. federal income tax purposes. In general, an exchanging stockholder will recognize gain or loss equal to the difference between the sum of the fair market value, determined as of the time of such exchange, of the Stock Consideration and cash, if any, received and the aggregate tax basis in the relevant Shares. Gain or loss will be calculated separately for each block of Shares sold or exchanged pursuant to the Offer and the Merger. If Shares are held by a stockholder as capital assets, gain or loss recognized by the stockholder will be capital gain or loss, which will be long-term capital gain or loss if the stockholder's holding period for the Shares exceeds one year. Under present law, long-term capital gains recognized by an individual stockholder will generally be taxed at a maximum Federal marginal tax rate of 28% (or, in the case of certain gains on capital assets held by an individual stockholder for more than 18 months, 20%), and long-term capital gains recognized by a corporate stockholder will be taxed at a maximum Federal marginal tax rate of 35%. 9 12 Unless an exemption applies, the Depositary will be required to withhold 31% of any cash payments to which a stockholder or other payee is entitled pursuant to the Offer, unless the stockholder or other payee provides his or her tax identification number (social security number or employer identification number) and certifies that such number is correct. Each stockholder and, if applicable, each other payee is required to complete and sign the Form W-9 that will be included as part of the transmittal letter sent to stockholders of the Company by Purchaser to avoid backup withholding, unless an applicable exemption exists and is proved in a manner satisfactory to Parent and the Depositary. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES THAT ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES, INCLUDING HOLDERS HOLDING SHARES AS PART OF A STRADDLE, A CONVERSION TRANSACTION, A HEDGING TRANSACTION OR OTHER SIMILAR TRANSACTION. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. The foregoing discussion is based upon the provisions of the Code, applicable Treasury regulations thereunder, Internal Revenue Service rulings and judicial decisions, as in effect as of the date of this Offer to Purchase. There can be no assurance that future legislative, administrative or judicial changes or interpretations will not affect the accuracy of the statements or conclusions set forth herein. Any such change could apply retroactively and could affect the accuracy of such discussion. No rulings have been or will be sought from the Internal Revenue Service concerning the tax consequences of the Offer and the Merger. No information is provided herein with respect to the tax consequences, if any, of the Offer and the Merger under applicable foreign, state or local income tax or other tax laws. Each stockholder of the Company is urged to consult such stockholder's own tax advisor as to the specific tax consequences to such stockholder of the Offer and the Merger under U.S. federal, state, local or any other applicable tax laws. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K (the "Company Form 10-K") for the year ended December 31, 1996 , the NYSE is the principal market on which the Shares are traded (under the symbol IC). The following table sets forth, for the quarters indicated, the high and low sales prices per Share as reported on the NYSE Composite Tape and the cash dividends paid per Share, as reported in the Company Form 10-K for periods in 1995 and 1996, and thereafter as reported in published financial sources (which takes into account the 3-for-2 split with respect to the Shares in March 1996): 10 13
HIGH LOW DIVIDENDS ------ ------ --------- 1996: First Quarter........................................ $28.75 $23.67 $0.19 Second Quarter....................................... 30.75 27.00 0.20 Third Quarter........................................ 31.88 26.88 0.20 Fourth Quarter....................................... 34.38 29.50 0.20 1997: First Quarter........................................ 36.13 30.50 0.23 Second Quarter....................................... 37.63 30.88 0.23 Third Quarter........................................ 37.25 33.25 0.23 Fourth Quarter....................................... 39.00 32.44 0.23 1998: First Quarter (through February 12, 1998).......................... 38.75 31.13 0.23
On February 10, 1998, the last full day of trading prior to the announcement of the execution of the Merger Agreement and of Purchaser's intention to commence the Offer, the reported closing sales price per Share on the NYSE Composite Tape was $35.69. On February 12, 1998, the last full day of trading prior to the date of this Offer, the reported closing sales price per Share on the NYSE Composite Tape was $38.75. STOCKHOLDERS ARE ENCOURAGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Following completion of the Offer, at least a majority and up to 75% of the outstanding Shares will be owned by Purchaser. Purchaser does not anticipate that the Shares would be subject to delisting by the NYSE as a result of completion of the Offer. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares should fall below 1,200, the number of publicly held Shares (exclusive of holdings of officers, directors and their families and other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000 or the aggregate market value of publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NYSE for continued listing and the listing of the Shares is discontinued, the market for the Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other sources. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer price. The Shares are currently registered under the Exchange Act. Purchaser does not anticipate that such registration will be subject to termination as a result of completion of the Offer. Such 11 14 registration may be terminated upon application by the Company to the SEC if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares pursuant to Section 12(g)(4) of the Exchange Act. The termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provision of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be eligible for NASDAQ reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained herein has been taken from or is based upon reports and other documents on file with the SEC or otherwise publicly available. Although neither Purchaser nor Parent has any knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, neither Purchaser nor Parent takes any responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to Purchaser. The Company is a Delaware corporation with its principal executive offices located at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504. The Company, through its wholly-owned subsidiary, Illinois Central Railroad Company ("ICRR") traces its origins to 1851, when ICRR was incorporated as the nation's first land grant railroad. On June 13, 1996, the Company acquired in a purchase transaction CCP Holdings, Inc. (CCPH). ICRR and CCPH are principally engaged in the rail freight transportation business. ICRR operates a 2,600 mile system between Chicago and the Gulf of Mexico, primarily transporting chemicals, grain and milled grain, coal, paper, and intermodal commodities while CCPH and one of its subsidiaries, Cedar River Railroad ("CRR"), operates approximately 850 miles of track from Chicago to Omaha, with connecting lines to Cedar Rapids and Sioux City. CRR runs from Waterloo, Iowa to Albert Lea, Minnesota. In addition to ICRR and CCPH, the Company's other wholly-owned subsidiary, IC Financial Services Corporation ("IC Financial"), was formed to finance through various special purpose companies the acquisition of locomotives and freight cars which are leased to ICRR. IC Financial also functions as the investment vehicle by which non-rail related activities are conducted. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC Internet site (http://www.sec.gov). Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and other information concerning the Company may also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. 12 15 Financial Information The following selected consolidated financial data relating to the Company and its subsidiaries has been taken or derived from the audited financial statements contained in the Company Form 10-K for 1996 and the condensed unaudited financial statements released by the Company on January 20, 1998. More comprehensive financial information is included in such report and such other documents filed by the Company with the SEC, and the financial data set forth below is qualified in its entirety by reference to such report and such other documents, including the financial information (and any related notes) contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth above. ILLINOIS CENTRAL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1996 1997 -------- -------- -------------- (UNAUDITED) INCOME STATEMENT DATA: Revenues......................................... $ 645.3 $ 657.5 $ 699.8 Operating expenses............................... 414.8 416.3 435.9 ------ ------ ------ Operating income................................. $ 230.5 $ 241.2 $ 263.9 ====== ====== ====== Net income....................................... $ 118.4 $ 136.6 $ 150.2 ====== ====== ====== Net income per share (basic)..................... $ 1.89 $ 2.22 $ 2.45 ====== ====== ====== BALANCE SHEET DATA: Current and other assets......................... $ 162.8 $ 287.3 $ 239.5 Net properties................................... 1,274.7 1,624.1 1,768.8 ------ ------ ------ Total assets..................................... $1,437.5 $1,911.4 $2,008.3 ====== ====== ====== Current and other liabilities.................... $ 337.6 $ 365.6 $ 384.1 Long-term debt................................... 383.6 633.7 572.2 Deferred income taxes............................ 246.2 356.6 409.2 Stockholders' equity............................. 470.1 555.5 642.8 ------ ------ ------ Total liabilities and stockholders' equity....... $1,437.5 $1,911.4 $2,008.3 ====== ====== ======
Certain Projected Financial Information In the course of its discussions with Parent described in Section 11, the Company provided Parent and its financial advisors with certain business and financial information which Parent believes was not and is not publicly available. Such information included, among other things, certain financial projections (the "Company Projections") prepared by management of the Company as a long-range plan. The Company Projections do not take into account any of the potential effects of the transactions contemplated by the Offer and the Merger. The Company does not as a matter of course publicly disclose internal projections as to future revenues, earnings or financial condition. The Company Projections disclose, among other things, the following: 13 16
BUDGET PLAN FY PLAN FY PLAN FY PLAN FY FY 1998 1999 2000 2001 2002 ------- ------- ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Operating revenue....................... $ 800.7 $ 865.1 $ 910.5 $ 954.4 $ 991.4 Operating expense....................... 487.7 515.7 537.3 554.7 573.0 ------- ------- ------- ------- ------- - - - - - Operating income 313.0 349.4 373.2 399.7 418.4 Other income............................ 1.5 1.7 1.7 1.7 1.7 Net interest expense.................... (38.5) (33.0) (25.7) (19.0) (9.0) ------- ------- ------- ------- ------- - - - - - Income before taxes..................... 276.0 318.1 349.2 382.4 411.1 Tax provision........................... (104.9) (121.8) (135.1) (148.0) (159.1) ------- ------- ------- ------- ------- - - - - - Net income.............................. $ 171.1 $ 196.3 $ 214.1 $ 234.4 $ 252.0 ======== ======== ======== ======== ======== Operating Ratio......................... 60.9% 59.6% 59.0% 58.1% 57.8% Basic shares............................ 61.4 61.4 61.4 61.4 61.4 Net income per share (basic)............ $2.79 $3.20 $3.49 $3.82 $4.10
THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT. NONE OF PARENT, PURCHASER OR ANY PARTY TO WHOM THE PROJECTIONS WERE PROVIDED GIVES ANY ASSURANCES AS TO THE ACCURACY OF SUCH INFORMATION. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED FOR COMPLIANCE BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, PURCHASER OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser Purchaser is a Delaware corporation incorporated on February 3, 1998 and to date has engaged in no activities other than those undertaken in connection with the Offer and the Merger. Purchaser is an indirect wholly-owned subsidiary of Parent. Purchaser is currently a wholly-owned subsidiary of Grand Trunk Corporation, a wholly-owned subsidiary of Parent. The principal executive offices of Purchaser are located at 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M9. Until immediately prior to the time that Purchaser purchases Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. Because Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding Purchaser is available. 14 17 Parent Parent is a Canadian corporation, incorporated in 1922 under a Special Act of the Parliament of Canada (the "Special Act"). In 1955, the Special Act was replaced by the Canadian National Railways Act, as amended. Parent's continuance under the Canada Business Corporations Act was authorized by the CN Commercialization Act. Such continuance was effected by Certificate of Continuance dated August 24, 1995. On November 9, 1995, Parent filed Articles of Amendment in order to subdivide the outstanding shares of Parent Common Stock. The Articles of Continuance of Parent contain certain material limitations on accumulation of shares of Parent Common Stock including without limitation a provision that no person (including his or her associates) may own or control, directly or indirectly, more than 15% of the outstanding voting shares of Parent. If this 15% threshold is exceeded, the holder of such shares may not exercise the voting rights attached to the shares. As of November 28, 1995, Parent ceased to be a Crown corporation. Parent operates the larger of Canada's two principal railroads and is the sixth largest railroad in North America based on its 1997 annual revenues. Its mainline rail network extends from Halifax to the major British Columbia ports, and its feeder lines serve principally eastern Canada and the grain-producing regions of western Canada. Parent's network connects to the strategically important Chicago gateway in the east through Grand Trunk Western Railroad Incorporated ("GTW"), one of its indirect wholly-owned subsidiaries, incorporated in Delaware, and in the west through a haulage agreement linking Chicago to Parent's lines at Duluth. Parent operates as a private sector freight railroad with no other significant line of business. As of December 31, 1997, Parent's rail network, including internal shortlines, consisted of approximately 14,550 route miles in eight Canadian provinces and approximately 750 route miles of track in six U.S. states. The principal executive offices of Parent are located at 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M9. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of Purchaser and Parent and certain other information are set forth in Schedule I hereto. Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto has had any transactions with the Company, or any of its executive officers, directors or affiliates that would require reporting under the rules of the SEC. The following selected consolidated financial data relating to Parent and its subsidiaries has been taken or derived from the audited consolidated financial statements of Parent contained in the Parent Annual Report on Form 40-F for the fiscal year ended December 31, 1996 and the condensed unaudited financial statements released by Parent on January 21, 1998. The 1995 and 1996 financial data differs from amounts previously reported to reflect the change in accounting for income taxes adopted by Parent in the fourth quarter of 1997 and certain reclassifications. More comprehensive financial information is included in such Form 40-F and such other documents filed by Parent with the SEC, and the financial data set forth below is qualified in its entirety by reference to such report and other documents including the financial information (including any related notes) contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth above in Section 8. 15 18 CANADIAN NATIONAL RAILWAY COMPANY SELECTED CONSOLIDATED FINANCIAL DATA (IN MILLIONS OF CDN$, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, --------------------------------------- 1995 1996 1997 ---------- ---------- ----------- (RESTATED) (RESTATED) (UNAUDITED) INCOME STATEMENT DATA: CANADIAN GAAP(1) Revenues............................................. $ 3,954 $3,995 $ 4,352 Operating expenses excluding special charges......... 3,514 3,385 3,545 Special charges...................................... 1,453 381 -- ------ ------ ------ Operating income (loss).............................. $ (1,013) $ 229 $ 807 ====== ====== ====== Income (loss) from continuing operations............. $ (1,092) $ 836 $ 421 ====== ====== ====== Basic per share data: Income (loss) from continuing operations............. $ (13.57) $ 9.85 $ 4.95 ====== ====== ====== U.S. GAAP(2) Revenues............................................. $ 3,912 $3,956 $ 4,322 Operating expenses excluding special charges......... 3,487 3,368 3,395 Special charges...................................... 1,415 365 -- ------ ------ ------ Operating (loss) income.............................. $ (990) $ 223 $ 927 ====== ====== ====== Income (loss) from continuing operations............. $ (1,017) $ 848 $ 469 ====== ====== ====== Basic per share data: Income (loss) from continuing operations............. $ (12.64) $ 9.99 $ 5.51 ====== ====== ======
AS AT DECEMBER 31, --------------------------------------- 1995 1996 1997 ---------- ---------- ----------- (RESTATED) (RESTATED) (UNAUDITED) BALANCE SHEET DATA: CANADIAN GAAP(1) Current and other assets............................. $ 1,398 $1,971 $ 1,953 Net properties including land........................ 4,650 4,869 5,122 ------ ------ ------ Total assets......................................... $ 6,048 $6,840 $ 7,075 ====== ====== ====== Current and other liabilities........................ $ 2,429 $2,253 $ 2,018 Long-term debt....................................... 1,313 1,499 1,640 Shareholders' equity:................................ 2,306 3,088 3,417 ------ ------ ------ Total liabilities and shareholders' equity........... $ 6,048 $6,840 $ 7,075 ====== ====== ====== U.S. GAAP(2) Current and other assets............................. $ 1,292 $1,931 $ 1,696 Net properties including land........................ 4,611 4,830 6,302 ------ ------ ------ Total assets......................................... $ 5,903 $6,761 $ 7,999 ====== ====== ====== Current and other liabilities........................ $ 2,376 $2,260 $ 2,361 Long-term debt....................................... 1,284 1,469 1,628 Shareholders' equity:................................ 2,243 3,032 4,010 ------ ------ ------ Total liabilities and shareholders' equity........... $ 5,903 $6,761 $ 7,999 ====== ====== ======
16 19 CANADIAN NATIONAL RAILWAY COMPANY SELECTED CONSOLIDATED FINANCIAL DATA (IN MILLIONS OF CDN$, EXCEPT PER SHARE DATA) - --------------- (1) In the fourth quarter of 1997, CN adopted retroactively new Canadian accounting principles for income taxes which resulted in a tax recovery of Cdn $708 million in 1996. There was no effect on the reported comparative figures for 1995. (2) CN's consolidated financial statements, from which the data is derived, are prepared on the basis of Canadian Generally Accepted Accounting Principles ("GAAP"), which are different in some respects from U.S. GAAP, principally in the treatment of track replacement costs, foreign exchange, pension costs, loss on extinguishment of long-term debt, stock based compensation, joint ventures and reorganization of shareholders' equity. See Annex A -- Canadian/U.S. GAAP Financial Information. (3) Certain figures previously reported for 1995 and 1996 have been reclassified to conform with the basis of presentation adopted in 1997. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $1.8 billion. Purchaser plans to obtain the necessary funds either through capital contributions or advances made directly or indirectly by Parent, by borrowing under the Credit Facilities referred to below or both. Parent has received a letter (the "Commitment Letter") dated February 9, 1998 from Goldman Sachs Canada Credit Partners Co. ("Goldman Canada"), Goldman Sachs Credit Partners L.P. ("Goldman Credit LP") and Bank of Montreal ("BMO" and, together with Goldman Canada and Goldman Credit LP, the "Lead Lenders") pursuant to which the Lead Lenders have severally committed to provide senior credit facilities (the "Credit Facilities") in an aggregate principal amount of up to $1.8 billion in the following respective percentages: Goldman Canada and Goldman Credit LP: 50% and BMO: 50%. All or a portion of the Credit Facilities may be syndicated either prior to or after the date of the first borrowing thereunder (the "Credit Facilities Closing Date"). A copy of the Commitment Letter is filed as an exhibit to the Schedule 14D-1 and incorporated herein by reference, and the following summary of the Credit Facilities is qualified in its entirety by reference thereto. The borrowers under the Credit Facilities will be Parent and a U.S. subsidiary of Parent (the "U.S. Borrower" and, together with Parent, the "Borrowers"). The Credit Facilities will consist of an $800 million term loan facility (the "Term Facility") and a $1 billion revolving credit facility (the "Revolving Facility"). Unless otherwise allocated by the Lead Lenders with the consent of Parent prior to the Credit Facilities Closing Date, 50% of the amount of each Credit Facility will be available to each of Parent and the U.S. Borrower. At the option of Parent, a portion of the Revolving Facility to be determined may be funded in Canadian Dollars. In addition, up to $200 million of the Revolving Facility will be available for letters of credit. Proceeds of borrowings under the Credit Facilities may be used to finance the Offer and the Merger, to pay related fees and expenses and, in the case of the Revolving Facility only, for general corporate purposes, including working capital purposes and commercial paper backstop. Borrowings under the Credit Facilities will mature, one year in the case of the Term Facility, or five years in the case of the Revolving Facility, from the Credit Facilities Closing Date, and will bear interest at a rate per annum equal to, at the option of the Borrowers, (i) the Eurodollar Rate plus a margin (the "Applicable Margin"), initially expected to be 0.275%, which will vary based on certain factors, including Parent's unsecured long term senior debt rating, (ii) the Base Rate and (iii) in the case of Revolving Facility borrowings in Canadian Dollars only, the Canadian Bankers Acceptance Rate plus the Applicable Margin; provided that during any period when more than 50% of the Credit Facilities are drawn, the Applicable Margin shall be increased by 0.05%. The Credit Facilities will also 17 20 provide for a facility fee payable on the aggregate amount of the Revolving Facility (whether drawn or undrawn) and the aggregate outstanding principal amount of the loans under the Term Facility at a rate per annum that is initially expected to be 0.125% and that will vary based on certain factors, including Parent's unsecured long term senior debt rating. The Credit Facilities will contain certain negative covenants applicable to Parent and its subsidiaries, including, without limitation, restrictions on liens and mergers and acquisitions and the following financial covenants: maximum debt to total capitalization, minimum net worth and, solely if Parent's unsecured long term senior debt rating remains below a certain threshold, minimum fixed charge coverage. Borrowings under the Credit Facilities on the Credit Facilities Closing Date are subject to the satisfaction or waiver of certain conditions, including, without limitation: (i) the execution and delivery of definitive documentation with respect to the Credit Facilities, in form and substance reasonably satisfactory to the Lead Lenders, (ii) all conditions to the Offer having been satisfied without waiver or amendment, (iii) receipt of all necessary governmental and shareholder approvals (other than STB approval), and all material third-party approvals and (iv) repayment in full of indebtedness outstanding under existing revolving credit facilities of Parent and its subsidiaries and termination of commitments thereunder. All borrowings and issuances of letters of credit under the Credit Facilities, including borrowings on the Credit Facilities Closing Date, are subject to the satisfaction or waiver of certain conditions, including, without limitation: (i) the accuracy of representations and warranties, (ii) the absence of any default or event of default under the Credit Facilities and (iii) the nonoccurrence of any material adverse change. Amounts outstanding under the Credit Facilities will be guaranteed by all present and future material subsidiaries of Parent and by the other Borrower; provided that the Company and its subsidiaries will not be required to provide any such guarantees until permitted by law to do so. The terms of the Credit Facilities will provide that, while the Voting Trust is in effect, net proceeds generated from sales of Shares or from asset sales by the Company and its subsidiaries (subject to certain exceptions) and received by the Parent and its subsidiaries (other than any subsidiaries held through the Voting Trust) are to be applied first, to repay outstandings under the Term Facility and second to repay outstandings under the Revolving Facility and to reduce commitments thereunder, unless, in the case of the Revolving Facility, at the time of receipt of such proceeds Parent's unsecured long term senior debt rating is above a certain threshold and the commitments under the Revolving Facility do not exceed $700 million. Pursuant to the Commitment Letter, Parent has agreed to pay certain fees to the Lead Lenders, to reimburse the Lead Lenders for certain expenses and to provide certain indemnities, as is customary for commitments of the type described herein. Parent anticipates that the loans made to Parent and its subsidiaries under the Credit Facilities will be repaid from a variety of sources, including, without limitation, funds generated internally by Parent and its subsidiaries (including, following the Merger, funds generated by the Company and its subsidiaries), bank refinancings and the public or private sale of debt or equity securities. No final decisions have been made concerning the sources and methods Parent and its subsidiaries will employ to repay such indebtedness. Such decisions will be made and may be modified by Parent based on prevailing market conditions and such other factors as Parent may deem appropriate. 11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE COMPANY. As Parent has previously disclosed, Parent's long-term strategy has been and continues to be to seek strategic alliances with key United States rail carriers. In February 1997, Mr. Gilbert H. Lamphere, the Chairman of the Company, and Mr. Paul M. Tellier, the President and Chief Executive Officer of Parent, began discussions concerning Parent's potential interest in pursuing a possible business combination or other alliance between the Company and Parent. Consistent with Parent's long-term strategy, Mr. Tellier indicated to Mr. Lamphere that Parent would be interested in pursuing discussions with the Company. 18 21 In March 1997, Mr. Tellier and Mr. Michael J. Sabia, the Executive Vice President and Chief Financial Officer of Parent, met in Chicago with Mr. Lamphere, Mr. E. Hunter Harrison, the President and Chief Executive Officer of the Company, and Mr. Alexander P. Lynch, a director of the Company. The parties discussed recent developments in the North American railroad industry, including trends and opportunities with respect to the consolidation of the railroad industry in the United States. At this meeting the parties reviewed the ongoing development of their joint terminal facility in Chicago as well as their respective strategic plans and objectives. The parties agreed to continue their review of the potential benefits of various forms of business combinations between them. The parties rapidly concluded that to make a meaningful assessment of these benefits, they would need to exchange confidential information. On March 13, 1997, Parent and the Company entered into a joint confidentiality and standstill agreement (the "Confidentiality Agreement"). During late March and April 1997, senior officers and advisors of Parent had a number of meetings and telephone conversations with senior officers of the Company and its financial advisor to discuss the merits of a potential strategic transaction. Detailed business reviews were undertaken by both companies and their advisors. In May 1997, senior management of Parent reviewed with the Strategic Planning Committee of Parent's Board of Directors, the evolution of the railroad industry in North America and the general outlines of a possible business combination with the Company. The Strategic Planning Committee concluded that it did not desire to pursue a business combination with the Company at that time, although it did not rule out such a transaction in the future. Parent so advised the Company. In July 1997, representatives of Parent inquired whether the Company would have any interest in resuming discussions regarding a possible business combination, and received a favorable response. Although no discussions were held at that time, during the late summer and fall of 1997 Parent continued to analyze the potential benefits of such a business combination. In November 1997, Mr. Tellier telephoned Mr. Lamphere to advise that, based on various circumstances, the Company was not prepared to pursue a transaction at that time, although Mr. Tellier stated that the issue could be re-examined later as such circumstances evolved. Neither party sent a formal notice terminating discussions pursuant to the Confidentiality Agreement. Discussions and meetings concerning a possible transaction resumed in December 1997 following a meeting among Mr. Sabia and Mr. Jean Pierre Ouellet, the Chief Legal Officer of Parent, and Messrs. Lamphere and Lynch. The parties agreed to renew discussions of a possible strategic transaction in January 1998. On January 6, 1998, Mr. Tellier and Mr. Lamphere met in Montreal to establish a basis for continuing discussions to seek to reach an agreement concerning a business combination and for proceeding with a due diligence review. Following the January 6, 1998 meeting, due diligence was commenced by both parties and their respective advisors. In addition, during early to mid-January there were various discussions between senior officers and advisors of Parent and senior officers, directors and advisors of the Company concerning the structure and terms of the transaction. On January 20, 1998, Parent informed the Company that it wished to pursue a transaction that included a cash tender offer for at least a majority of the Company's common stock, with some portion of the consideration in the back-end merger consisting of Parent Common Stock. There were several discussions between the parties with respect to the structure of the proposed transaction, the implications of the cash tender offer and the willingness of Parent to provide a collar arrangement to protect the value of the Parent Common Stock to be issued in a back-end merger. On January 22, 1998, the Board of Directors of the Company met and reviewed with the Company's management and financial and legal advisors the status and possible terms of the transaction as well as the status of negotiations. 19 22 Following a number of discussions between the parties, on January 27, 1998, at a meeting in New York, representatives of Parent expressed their willingness to have Parent provide value protection within a specified range on the shares of Parent Common Stock that would be issued in the Merger depending on the number of shares of Parent Common Stock to be issued in the Merger. On January 28, 1998, the parties agreed that the aggregate stock consideration would not exceed 25% of the aggregate consideration to be paid in the transaction. During late January and early February 1998 meetings were held among the senior officers and financial and legal advisors of both companies to negotiate the terms of the Merger Agreement and the related documentation. On February 5, 1998, the Wall Street Journal and The Globe and Mail, a national daily Canadian newspaper, both reported that Parent and the Company were conducting discussions with respect to a business combination that would pay the Company's stockholders 75% cash and 25% stock with a value in the high $30s per Share. Parent and the Company each issued releases confirming the accuracy of these reports. On February 6 and 7, 1998, Mr. Tellier and Mr. Lamphere met in Montreal to discuss various outstanding issues. Intensive discussions regarding the Merger Agreement and related agreements continued among the parties and their advisors through February 10, 1998. The Company's Board of Directors held a special meeting on February 8, 1998, when presentations from senior management of the Company and the Company's financial and legal advisors were made regarding a possible transaction between the Company and Parent. At a special meeting held on February 10, 1998, the Board of Directors of Parent reviewed the transaction and, following presentations by senior officers and financial and legal advisors of Parent, unanimously approved the terms and conditions of the Merger Agreement and the related documentation. The Board of Directors of the Company, at a special meeting held on February 10, 1998, unanimously approved the terms and conditions of the Merger Agreement and the related documentation. On February 10, 1998, the parties executed the Merger Agreement and publicly announced the strategic combination. Certain Operating Relationships The Company and GTW are parties to a terminal services agreement dated February 21, 1996 (the "Terminal Services Agreement") whereby Parent and GTW have use of a new intermodal terminal in Chicago built by the Company. The new terminal has higher through-put and expansion capabilities than the facility previously used by Parent. Under the Terminal Services Agreement, the Company also performs certain services for GTW at the new intermodal terminal in connection with GTW's Container-on-Flat-Car and Trailer-on-Flat-Car business in Chicago. Under a certain trackage agreement, GTW has been granted trackage rights to move its traffic over certain rail properties of the Company for a fee computed per car-mile. GTW and ICRR also have a detour agreement that permits either railroad to use the other's tracks in certain emergencies, for a fee computed on a train-mile basis. GTW and ICRR are also parties to certain agreements governing interchange of railcars between them in the Chicago area, and under which ICRR performs certain switching, classification, and other services with respect to cars interchanged to or from GTW in Chicago. GTW and ICRR are parties to a multilateral car pooling agreement, under which each railroad member of the pool has use of refrigerator cars contributed to the pool by itself and other pool members, and have an agreement setting compensation for use by GTW of ICRR intermodal equipment. In 1997, approximately $8.3 million was paid under the Terminal Services Agreement for rent and locomotive fuel and servicing. None of the payments made with respect to 20 23 any other transaction exceeded one percent of the Company's consolidated revenues in each such period. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between Parent or Purchaser, or their respective subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, or a sale or other transfer of a material amount of assets. 12. PURPOSE OF THE OFFER AND MERGER; PLANS FOR THE COMPANY. The purpose of the Offer is for Parent, through Purchaser, to acquire a majority equity interest in the Company as a first step in consummating a business combination between Parent and the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer and thereby accomplish the business combination of Parent and the Company. Under Delaware law, the approval of the Company's Board and the affirmative vote of the holders of a majority of the outstanding Shares is required to adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Board of Directors of the Company has unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby (subject to directors' fiduciary duties), and the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. Accordingly, if the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause (through the Voting Trustee) the adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other stockholder. Plans for the Company Upon consummation of the Merger, the combination of Parent and the Company will create the fifth largest railway in North America, based on 1997 annual revenues of Cdn$5.3 billion (U.S.$3.7 billion) The Surviving Corporation will have approximately 18,700 route miles in Canada and the United States and 24,600 employees. The Merger is expected to yield new single-line service routes between North-South markets that are expected to result in more frequent and reliable service. Parent and the Company note that the combined strengths of the companies would include a seamless North-South network from all major markets in Canada through Chicago and Detroit to the Gulf of Mexico, positioning the Surviving Corporation along a trade corridor which had 1997 annual rail revenues of over $5 billion; the ability to capitalize on the liberalization of trade among Canada, the United States and Mexico; and expedited, more reliable and more efficient single line service that will free up assets, increase rail car availability and reduce switching between the two railways. Effective upon consummation of the Offer, and subject to the rules, regulations and practices of the STB, the Company shall have taken all action necessary to cause an individual, who shall be identified as a suitable candidate by Parent prior to the consummation of the Offer and who shall be independent of Parent and reasonably satisfactory to the Board of Directors of the Company, to be appointed to the Board of Directors of the Company immediately following the resignations of Messrs. Gilbert H. Lamphere and Alexander P. Lynch from the Board of Directors of the Company. Effective upon consummation of the Offer, Parent shall have taken all action necessary to appoint E. Hunter Harrison to the position of Chief Operating Officer of Parent and to cause Messrs. Gilbert H. Lamphere and Alexander P. Lynch to be elected to serve on its Board of Directors. In addition, either Mr. Lamphere or Mr. Lynch will have the right (and Parent will take all necessary action to cause Mr. Lamphere or Mr. Lynch) to be appointed to serve on the Strategic 21 24 Planning Committee, the Audit and Finance Committee, the Human Resources Committee and the Corporate Governance Committee of such Board of Directors, it being understood that no more than one of such individuals will have the right to be appointed to any one of such committees, and such individuals shall be entitled to determine on which such committees they elect to be appointed. Except as noted in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure or business. 13. THE MERGER AGREEMENT; OTHER AGREEMENTS. THE MERGER AGREEMENT THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT WHICH IS FILED AS AN EXHIBIT TO THE SCHEDULE 14D-1. TERMS NOT OTHERWISE DEFINED HEREIN OR IN THE FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT. STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable, but in no event later than five business days after the public announcement of the terms of the Merger Agreement. The Merger Agreement also provides that the obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction or waiver of the Minimum Condition and certain other conditions that are described in Section 16. Pursuant to the Merger Agreement, Purchaser reserves the right to waive any or all of the conditions to the Offer, to extend the Offer if any conditions to the Offer are not satisfied and to make any change in the terms or conditions of the Offer. However, other than as provided below in "Alternative Transaction Structures", Purchaser has agreed in the Merger Agreement that, without the prior written consent of the Company, Purchaser will not make any waiver or change to the Offer which (i) increases or decreases the number of Shares sought in the Offer, (ii) changes the form of consideration to be paid or decreases the price per Share, (iii) waives the Minimum Condition, (iv) waives the conditions set forth in paragraphs (a), (b) or (e) of Section 16, (v) waives the condition relating to the expiration of the waiting period (if any) under the HSR Act or the receipt of a favorable informal advisory opinion from the STB, (vi) is adverse to the holders of Shares or modifies any of the conditions to the Offer or (vii) imposes any conditions to the Offer in addition to those set forth in Section 16. Parent has agreed in the Merger Agreement that if the Offer shall not have been consummated by its scheduled expiration due to the failure to satisfy (i) any of the conditions to the Offer set forth in paragraphs (a) or (b) of Section 16, (ii) the condition to the Offer relating to expiration of the waiting period under the HSR Act or (iii) the condition relating to the receipt of the favorable informal advisory opinion from the STB staff, Parent will, at the request of the Company, cause Purchaser to extend the Offer for a period of up to twenty business days. The Merger Agreement also provides that, subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition) and the terms of the Merger Agreement, Parent shall provide or cause to be provided the funds to Purchaser and Purchaser shall accept for payment and pay for, as promptly as practicable after the Expiration Date, all Shares validly tendered and not withdrawn pursuant to the Offer that Purchaser is obligated to purchase. Simultaneous with the purchase of Shares pursuant to the Offer, the Shares will be deposited in the Voting Trust in accordance with the terms and conditions of the Voting Trust Agreement described below. Alternative Transaction Structures. Notwithstanding anything to the contrary set forth thereunder, the Merger Agreement provides that if the Minimum Condition has not been satisfied prior to the scheduled expiration of the Offer (as such Offer may have been extended pursuant to the 22 25 Merger Agreement), Purchaser has the right at its option to extend the Offer for a period of up to twenty business days. If, at the scheduled expiration of the Offer (as such date may have been extended by Purchaser as contemplated by the preceding sentence), the Minimum Condition has not been satisfied, then (unless the parties otherwise agree) at Parent's election either (a) Purchaser shall amend the terms of the Offer by increasing the number of Shares sought in the Offer to all of the outstanding Shares, subject to the conditions set forth above in "The Offer", in which event the Merger Agreement shall be modified to provide that (i) each Share outstanding immediately prior to the Effective Time (other than those Shares held by the Company as treasury stock or owned by Parent or any subsidiary of Parent) shall be converted into the right to receive an amount of cash equal to $39.00, (ii) the date on which the Merger Agreement may be terminated by Parent or the Company if the Offer has not then been consummated shall be extended by the same number of business days as the number of business days by which Purchaser has extended the Offer as contemplated by this clause (a), (iii) references to the Investment Commitment Agreements shall be deleted, (iv) if the conditions set forth in Section 253 of the DGCL are satisfied, and subject to the terms of the Voting Trust Agreement, Parent shall cause the trustee of the Voting Trust to effect the Merger pursuant to Section 253 of the DGCL and Parent, Purchaser and the Company will use all reasonable best efforts to satisfy the requirements of Section 253 of the DGCL and (v) certain other provisions of the Merger Agreement shall be modified to reflect such amendment to the terms of the Offer, or (b) Purchaser shall terminate the Offer and Purchaser and the Company shall proceed with the Merger, in accordance with the Merger Agreement, in which event the terms and conditions of the Merger Agreement shall be modified to provide that (i) references to the Offer in the Merger Agreement shall be deleted, (ii) the appointments of Messrs. Lamphere and Lynch to the Board of Directors of Parent and Mr. E. Hunter Harrison to the position of Chief Operating Officer of Parent shall take effect at the Effective Time and not at consummation of the Offer and (iii) certain other provisions of the Merger Agreement, primarily the provisions relating to termination and the conditions to the obligations of the Parent, Purchaser and the Company to consummate the Merger, shall be modified to reflect the fact that the Offer has been terminated. The Merger. The Merger Agreement provides that as soon as practicable after all conditions to the Merger set forth therein have been satisfied or, to the extent permitted thereunder, waived, Purchaser will be merged with and into the Company in accordance with the DGCL. As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation and will become an indirect wholly-owned subsidiary of Parent. From and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of the Company and Purchaser, all as provided under the DGCL. Conversion of Shares. The Merger Agreement provides that, except as provided above in "Alternative Transactions", at the Effective Time, (i) each Share held by the Company as treasury stock or owned of record or beneficially by Parent or any subsidiary of Parent immediately prior to the Effective Time (including the Shares held in the Voting Trust) shall be canceled, and no payment shall be made with respect thereto; (ii) each share of common stock of Purchaser outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation and each such share shall be deposited in the Voting Trust; and (iii) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of 46,051,761 Shares, each Share outstanding immediately prior to the Effective Time shall, except as otherwise provided, be converted into the right to receive that number of duly authorized, validly issued, fully paid and nonassessable shares of Parent Common Stock equal to the fraction obtained by dividing $39.00 by the Parent Average Closing Price (the "Stock Consideration"). "Parent Average Closing Price" is defined in the Merger Agreement as the average closing price of the Parent Common Stock on the NYSE for the twenty trading day period ending on the second trading day prior to the date of the Effective Time; provided that if such average closing price is less than $43.00 then the Parent 23 26 Average Closing Price shall be $43.00 and if such average closing price is greater than $64.50 then the Parent Average Closing Price shall be $64.50. If Purchaser shall have purchased, pursuant to the Offer, an aggregate of less than 46,051,761 Shares, each Share outstanding immediately prior to the Effective Time shall be converted into the right to receive (A) a number of shares of Parent Common Stock equal to the fraction obtained by dividing $39.00 by the Parent Average Closing Price, multiplied by (2) the Stock Proration Factor; and (B) cash in an amount equal to the product of (1) 1 minus the Stock Proration Factor (the "Reciprocal Stock Proration Factor"), multiplied by (2) $39.00. The "Stock Proration Factor" is defined in the Merger Agreement as a fraction, of which the numerator shall be the Stock Number and the denominator shall be the total number of Shares outstanding as of the Effective Time, minus the number of Shares purchased by Purchaser pursuant to the Offer. The "Stock Number" shall be 15,350,586, plus any Shares issued after the date of the Merger Agreement in accordance with the Merger Agreement. The Merger Agreement provides that if prior to the Effective Time, Parent or the Company (as the case may be) should, (after obtaining the consent of the other party) split, combine or otherwise reclassify the Parent Common Stock or the Shares, or pay a stock dividend or other stock distribution in Parent Common Stock or Shares, or otherwise change the Parent Common Stock or Shares into any other securities, or make any other such stock dividend or distribution in capital stock of Parent or the Company in respect of Parent Common Stock or Shares, respectively, then the Stock Consideration will be appropriately adjusted to reflect such split, combination, dividend or other distribution or change. In lieu of any fractional share of Parent Common Stock, Parent will pay to each former stockholder of the Company who would otherwise be entitled to receive such a fractional share an amount in cash determined by multiplying the average closing price of Parent Common Stock on the NYSE for the five trading day period prior to the Effective Time (the "Parent Average Price") by the fraction of a share of Parent Common Stock to which such stockholder would otherwise have been entitled. No Appraisal Rights. The Merger Agreement states that in accordance with Schwabacher v. United States, 334 U.S. 182 (1948), stockholders of the Company shall not have any appraisal or like rights; provided, however, that if the STB or a court of competent jurisdiction determines that appraisal rights are available to holders of Shares, then such holders shall be provided with appraisal rights in accordance with the DGCL to the extent required under the DGCL. The Company has agreed to give Parent prompt notice of any demands received by the Company for appraisal of Shares and the right to participate in all negotiations and proceedings with respect to such demands. Except with the prior written consent of Parent, the Company has agreed not to make any payment with respect to, or settle or offer to settle, any such demands or as otherwise required by applicable law. Stock Options. To the extent permitted under the rules, regulations and practices of the STB and consistent with the application of applicable Canadian securities laws and the rules and regulations of relevant stock exchanges, the Board of Directors of Parent and the Company shall adopt such resolutions or take such other actions as may be required to adjust the terms of each outstanding employee or director stock option to purchase Shares granted under any employee or director stock option or compensation plan or arrangement ("Options"), as necessary to provide that, at the Effective Time each Option outstanding immediately prior to the Effective Time shall be: (i) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of 46,051,761 shares, amended and converted into options ("Parent Options") to acquire, on the same terms and conditions as were applicable under such Options (except that such Parent Options shall (other than as provided in "Treatment of the Company Employees and Directors" below) be fully vested), a number of shares of Parent Common Stock determined by multiplying the number of Shares subject to such Option by the Exchange Ratio, rounded up to the nearest whole share of Parent Common Stock, at a price per share equal to (y) the aggregate exercise price for the 24 27 Shares subject to such Option, divided by, (z) the number of shares of Parent Common Stock subject to such Parent Option; (ii) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of less that 46,051,761 Shares, amended and converted into: Parent Options to acquire, on the same terms and conditions as were applicable under such Options (except that such Parent Options shall (other than as provided in "Treatment of the Company Employees and Directors" below) be fully vested), a number of shares of Parent Common Stock determined by multiplying the number of Shares subject to such Option by the Exchange Ratio and the Stock Proration Factor, rounded up to the nearest whole share of Parent Common Stock, at a price per share equal to (x) the aggregate exercise price for the Shares subject to such Option, multiplied by (y) the Stock Proration Factor, and divided by, (z) the number of shares of Parent Common Stock subject to such parent Option, and an additional Parent Option to purchase a number of shares of Parent Common Stock determined as follows: the Reciprocal Stock Proration Factor, multiplied by the number of Shares subject to such Option, multiplied by $39.00, and divided by the Parent Average Price, rounded up to the nearest whole share of Parent Common Stock, at a price per share equal to (a) the aggregate exercise price for the Shares subject to such Option, multiplied by (b) the Reciprocal Stock Proration Factor, and divided by (c) the number of shares of Parent Common Stock subject to such Parent Option; or (iii) in the event that Parent elects to tender for all of the Shares, amended and converted into a Parent Option to purchase a number of shares of Parent Common Stock determined as follows: (1) the number of Shares subject to such Option, multiplied by (2) $39.00, and divided by (3) the Parent Average Price, rounded, if necessary, up to the nearest whole shares of Parent Common Stock, at a price per share equal to (a) the aggregate exercise price for the Shares subject to such Option, divided by (b) the number of shares of Parent Common Stock subject to such Parent Option. The Surviving Corporation. The Merger Agreement provides that the certificate of incorporation and bylaws of the Company shall be amended as set forth in Exhibits B and C to the Merger Agreement, respectively, and as so amended shall be the certificate of incorporation and bylaws of the Surviving Corporation, respectively. The Merger Agreement also provides that except as set forth therein, the directors of the Company as of the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until they otherwise cease to be directors of the Surviving Corporation and the officers of the Company as of the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until they otherwise cease to be officers of the Surviving Corporation. Effective upon consummation of the Offer, the Company anticipates appointing Mr. John D. McPherson as the Chief Executive Officer and a director of the Company. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent with respect to, among other things, its existence and power, qualification, corporate and governmental authorization, non-contravention, subsidiaries, capital structure, public filings, financial statements, employee benefit plans, compliance with laws, absence of undisclosed material liabilities, absence of certain changes, absence of litigation, labor matters, taxes, finder's fees, takeover statutes, rights plans, environmental compliance, and receipt of financial advisors' written opinions. In the Merger Agreement, Parent and Purchaser have made customary representations and warranties to the Company with respect to, among other things, their existence and power, qualification, corporate and governmental authorization, non-contravention, subsidiaries, capital structure, public filings, financial statements, employee benefit plans, compliance with laws, absence of undisclosed material liabilities, absence of certain changes, absence of litigation, labor matters, taxes, finder's fees, environmental compliance, sufficiency of funds, and ownership of Company Common Stock. 25 28 Covenants. The Merger Agreement contains various customary covenants of the parties thereto. A description of these covenants follows: Conduct of Business. Except as otherwise expressly set forth in the Merger Agreement, during the period from the date of the Merger Agreement through the date of STB approval or exemption of the Merger (the "Control Date"), the Company shall, and shall cause each of its subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice and in compliance in all material respects with all applicable laws and regulations and, to the extent consistent therewith, shall use their reasonable best efforts to preserve intact their current business organizations, use their reasonable best efforts to keep available the services of their current officers and of their key employees as a group and use their reasonable best efforts to preserve their relationships with those persons having business dealings with them. The Company, in conducting its business and operations, shall have due regard for the interests of the holders of the Trust Certificates, as investors in the Company, determined without reference to such holders' interests in railroads other than the Company or its subsidiaries. Except as set forth in the Merger Agreement or as set forth in a disclosure schedule thereto or as required to implement the Rights Plan (as defined below) in accordance with and subject to clause (ii) hereof, without limiting the generality of the foregoing, from the date of the Merger Agreement through the Control Date, the Company has agreed that it will not, and will not permit any of its subsidiaries to (without the prior written consent of Parent): (i) other than dividends and distributions (including liquidating distributions) by a direct or indirect wholly-owned subsidiary of the Company to its parent and other than regular quarterly cash dividends of $0.23 per share with respect to the Shares, (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock (except as contemplated by clause (ii) below), (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (z) purchase, redeem, retire or otherwise acquire any shares of its capital stock or the capital stock of any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; provided that, following the Effective Time, subject to applicable legal restrictions and financial covenants contained in instruments relating to outstanding indebtedness, the Company will not decrease the aggregate amount of dividends and other distributions in respect of its outstanding capital stock from the level paid immediately prior to the Merger; (ii) issue, deliver, sell, pledge or otherwise encumber any Company Securities or any Subsidiary Securities or any securities convertible into, or any rights, warrants or options to acquire, any such Company Securities or any Subsidiary Securities, in each case, other than (x) pursuant to the exercise of existing stock options, (y) grants of stock options and other stock-based employee benefits prior to the Effective Time in the ordinary course of business consistent with past practice and issuances pursuant thereto or (z) securities issued by a direct or indirect wholly-owned subsidiary of the Company to the Company or a direct or indirect wholly-owned subsidiary of the Company; provided that if any Person shall have announced an Acquisition Proposal, the Company will have the right, prior to the consummation of the Offer, to implement a shareholder rights plan (the "Rights Plan"), but only so long as such rights plan contains provisions reasonably satisfactory in form and substance to Parent to exempt the Merger Agreement and the transactions to be effected pursuant to the Merger Agreement from the plan and to assure that the Merger Agreement and the transactions to be effected pursuant to the Merger Agreement will not trigger such rights plan; (iii) adopt, propose or agree to any amendment to its (or any of its subsidiary's) certificate of incorporation, by-laws or other comparable organizational documents; (iv) (A) without the prior written consent of Parent, sell, lease, license, mortgage or otherwise encumber, voluntarily subject to any Lien or otherwise dispose of any rail lines or rights of way, it being understood that nothing contained in this clause (A) shall prevent either the sale or disposition of rail stock in the ordinary course of business or the movement of such rail stock within the Company's rail system; provided, that if the Company requests in writing that it be permitted to engage in a transaction that requires Parent's consent under this clause (A) and Parent does not respond within 20 days of receipt of such request, the 26 29 Company shall be permitted to engage in such transaction; and provided further, that this clause (A) shall not apply with respect to any transaction entered into prior to the date of the Merger Agreement; or (B) sell, lease, license, mortgage or otherwise encumber, voluntarily subject to any Lien or otherwise dispose of any of its properties or assets (excluding rail lines or rights of way), other than (x) leases or licenses or railroad equipment and property in the ordinary course of business consistent with past practice or (y) transactions in the ordinary course of business consistent with past practice and not exceeding in the aggregate $30,000,000 on an annual basis; (v) make or agree to make any acquisition (including through a leasing arrangement) (other than of inventory and rolling stock in the ordinary course of business) or capital expenditure in excess of $50,000,000 in the aggregate annually except as specified on a schedule to the Merger Agreement or pursuant to agreements and commitments entered into prior to the date of the Merger Agreement and previously made available to Parent; (vi) incur any indebtedness for borrowed money or guarantee any such indebtedness other than intercompany indebtedness except for (i) borrowings under existing credit facilities, replacements therefor and refinancings thereof or (ii) other borrowings in the ordinary course of business consistent with past practice; provided that aggregate borrowings under clauses (i) and (ii) do not exceed $200,000,000; (vii) except for loans, advances, capital contributions or investments (x) specified on a schedule to the Merger Agreement or (y) made in the ordinary course of business consistent with past practice and not exceeding $15,000,000 on an annual basis, make any loans, advances or capital contributions to, or investments in, any other Person (other than, in the case of the Company, to the Company or any of its subsidiaries or, in the case of the Railroad Subsidiaries, to a Railroad Subsidiary or any subsidiary of a Railroad Subsidiary, as the case may be); (viii) except for elections that are required by law or are consistent with past practice, make any tax election; (ix) other than payments with respect to judgments, pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise) other than the payment, discharge, settlement or satisfaction of claims, liabilities or obligations (A) in the ordinary course of business consistent with past practice or in accordance with their terms, (B) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company filed with the SEC prior to the Effective Time or (C) incurred since the date of such financial statements in the ordinary course of business consistent with past practice and with the Merger Agreement; provided that with respect to clause (C) none of such payments, discharges, settlements or satisfaction shall in any event exceed $15,000,000; (x) except (i) as otherwise provided in a schedule to the Merger Agreement or (ii) in the ordinary course of business consistent with past practice (it being understood that the taking by the Company or any of its subsidiaries of any of the actions described in this paragraph (x) with respect to a contract involving annual payments of more than $10,000,000 shall not be in the ordinary course of business), enter into any contract or agreement involving annual payments of more than $5,000,000, modify or amend in any material respect or terminate any such contract or agreement to which the Company or any of its subsidiaries is a party, or waive, release or assign any rights or claims under any contract or agreement that are significant to such contract or agreement; provided that in entering into contracts in the ordinary course of business, each of the Company and its subsidiaries shall act entirely in its own interest as an independent enterprise; (xi) make any material change to its accounting methods, principles or practices, except as may be required by United States generally accepted accounting principles; (xii) except (a) for arrangements entered into in the ordinary course of business consistent with past practice, (b) as contemplated by the Merger Agreement or (c) as required by applicable law, enter into, adopt or materially amend or change the funding or accrual practices of any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of the Company or any of its subsidiaries (or any other Person for whom either the Company or any of its subsidiaries will have liability), or (except for normal increases in the ordinary course of business that are consistent with past practices) materially increase in any manner the compensation or 27 30 fringe benefits of any employee of the Company or any of its subsidiaries (or any other Person for whom the Company or any of its subsidiaries will have liability) or pay any material benefit not required by any existing plan and arrangement (including the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (xiii) enter into any agreement containing any provision or covenant (x) limiting in any respect the ability to compete with any Person which would bind the Company or any of its subsidiaries or any successor or (y) granting any concessions or rights to any railroad or other Person with respect to the use of any rail lines, yards or other fixed railroad property of the Company or its subsidiaries (whether through divestiture of lines, the grant of trackage or haulage rights or otherwise) in each case other than in the ordinary course of business consistent with past practice; or (xiv) authorize or commit or agree to take any of the foregoing actions. Pursuant to the Merger Agreement, from the date of the Merger Agreement until the Effective Time, Parent and its subsidiaries shall conduct their business in the ordinary course consistent with past practice and shall use their commercially reasonable efforts to preserve intact their business organizations and relationships with third parties and to keep available the services of their present officers and employees. Without limiting the generality of the foregoing, from the date of the Merger Agreement until the Effective Time: (a) Parent will not adopt or propose any change in its articles of incorporation or bylaws; (b) Parent will not, and will not permit any subsidiary to take any action that would make any representation and warranty of Parent under the Merger Agreement inaccurate in any material respect at, or as of any time prior to, the Effective Time; (c) prior to the Effective Time, other than regular quarterly cash dividends not to exceed Cdn $0.265 per share with respect to Parent Common Stock, Parent will not (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock or (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares in its capital stock; (d) Parent will not, and will not permit any subsidiary of Parent to, sell, lease, license, mortgage or subject to Lien or otherwise dispose of any of its properties or assets, other than transactions in the ordinary course of business, including dispositions that are part of Parent's rationalization plan or transactions not exceeding in the aggregate $200,000,000; (e) except as set forth on a schedule to the Merger Agreement, Parent will not, and will not permit any subsidiary of Parent to, enter into any contract or arrangement or otherwise take any action that could reasonably be expected to materially delay or otherwise interfere with the consummation of the Offer or Merger; and (f) Parent will not, and will not permit any subsidiary to, agree or commit to do any of the foregoing. Other Offers. The Company agrees (i) that neither the Company nor any Company subsidiary shall, and it shall direct and use its reasonable best efforts to cause its officers, directors, employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any Company subsidiary) not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) or any indication of interest, with respect to a merger, acquisition, consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or any equity securities of, the Company or any Company Subsidiary, (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"), or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person, relating to an Acquisition Proposal, or afford access to the properties, books or records of the Company or any Company subsidiary to any Person that may be considering making or has made or has stated an intention to make, an Acquisition Proposal, or release any third party from any obligations under any existing standstill agreement or arrangement, or enter into any agreement with respect to an Acquisition Proposal; (ii) that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing; and (iii) that it will notify Parent (including in such notification the identity of the third party making 28 31 inquiries or proposals, requesting information or access or seeking to initiate or continue negotiations or discussions, as the case may be) with reasonable promptness (but in no event later than 24 hours thereafter) if any such inquiries or proposals are received by, any such information or access is requested from, or any such negotiations or discussions are sought to be initiated or continued with, it. Notwithstanding the foregoing, the Company or its Board of Directors may (x) take any action required to comply with Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal or, prior to the earlier of (A) consummation of the Offer or (B) the adoption of the Merger Agreement by the stockholders of the Company, (y) take any action as contemplated under clause (e) of "Termination", below or (z) directly or indirectly, furnish non-public information and access to, and may participate in discussions and negotiations with, any Person in response to an unsolicited bona fide Acquisition Proposal, if the Board of Directors of the Company has concluded in good faith, based on the advice of outside counsel, that such action is reasonably necessary for the Board of Directors to act in a manner consistent with its fiduciary duties under applicable law; except that (with respect to clauses (y) and (z) hereof) prior to furnishing non-public information and access to, or participating in discussions or negotiations with, such Person, the Company receives from such Person an executed confidentiality and standstill agreement with terms not in the aggregate less favorable to the Company than those contained in the Confidentiality Agreement (it being understood that the Company may enter into a confidentiality agreement without a standstill provision or with a standstill provision less favorable to the Company provided that it waives or similarly modifies the standstill provision in the Confidentiality Agreement); provided further, that at least 48 hours prior to the entry into or announcement of an intention to enter into a definitive agreement with respect to an Acquisition Proposal, the Company shall have provided written notice to Parent advising Parent of its intention to enter into a definitive agreement with respect to an Acquisition Proposal and specifying the material terms and conditions of such Acquisition Proposal. Within such 48 hour period, Parent may propose an improved transaction. Registration Rights. The Company shall, at Parent's request, at any time and from time to time within three years after the termination of the Merger Agreement, as expeditiously as possible prepare and file up to three registration statements under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all securities that have been deposited in the Voting Trust by Parent, in accordance with the intended method of sale or other disposition stated by Parent, including a "shelf" registration statement under Rule 415 under the Securities Act or any successor provision; and the Company shall use its reasonable best efforts to qualify such securities under any applicable state securities laws. Parent agrees to use reasonable efforts to cause, and to cause any underwriters of any sale or other disposition to cause, any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis. The Company shall use reasonable efforts to cause each such registration statement to become effective, to obtain all consents or waivers of other parties which are required therefore, and to keep such registration statement effective for such period not in excess of 180 calendar days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sale or other disposition. The obligations of the Company thereunder to file a registration statement and to maintain its effectiveness may be suspended for one or more periods of time not exceeding 60 calendar days in the aggregate with respect to any registration statement if the Board of Directors of the Company shall have determined that the filing of such registration statement or the maintenance of its effectiveness would require disclosure of nonpublic information that would materially and adversely affect the Company. Any registration statement prepared and filed under this provision, and any sale covered thereby, shall be shared equally by the Company and Parent except for underwriting discounts or commissions, brokers' fees and the fees and disbursements of Parent's counsel related thereto. Parent shall provide all information reasonably requested by the Company for inclusion in any registration statement to be filed hereunder. If, during the time periods referred to in the first sentence of this paragraph, the Company effects a registration under the Securities Act of the Company's securities for its own account or for any other of its stockholders (other than on form S-4 or form S-8, or any successor form), it shall allow Parent the right to 29 32 participate in such registration, and such participation shall not affect the obligation of the Company to effect demand registration statements for Parent under this section; provided that, if the managing underwriters of such offering advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, the Company shall include the securities requested to be included therein by Parent pro rata with the securities intended to be included therein by the Company. In connection with any registration pursuant contemplated by this paragraph, the Company and Parent shall provide each other and any underwriter of the offering with customary representations, warranties, covenants, indemnification, and contribution in connection with such registration. This provision applies also to the Company's Railroad Subsidiaries. Antitakeover Statutes. Subject to the fiduciary duties of the Board of Directors of the Company under applicable law, if any takeover statute is or may become applicable to the transactions contemplated hereby, the Company and its Board of Directors shall use all reasonable efforts to grant such approvals and to take such actions as are necessary so that the transactions contemplated by the Merger Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any takeover statute on any of the transactions contemplated by the Merger Agreement. Director and Officer Liability. The Merger Agreement provides that Parent shall cause the Surviving Corporation, for a period of six years after the Control Date, (i) to maintain in effect in its certificate of incorporation and by-laws the current provisions regarding the elimination of liability of directors and indemnification of and advancement of expenses to officers, directors, employees and agents currently contained in the certificate of incorporation and by-laws of the Company and (ii) to maintain the existing indemnification agreements covering such directors and officers of the Company; provided that such indemnification agreements shall be subject to any limitation imposed from time to time under applicable law. For six years after the Control Date, the Merger Agreement provides that Parent will cause the Surviving Corporation to maintain the officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Control Date covering each such Person currently covered by the Company's officers' and directors' liability insurance or a substitute policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date of the Merger Agreement, provided that, in satisfying such obligation, Parent shall not be obligated to cause the Surviving Corporation to pay premiums in excess of 200% of the amount per annum the Company paid in its last full fiscal year; provided, further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. Listing. Parent shall use all reasonable best efforts to cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on the NYSE, Toronto Stock Exchange and the other national securities exchanges on which the Parent Common Stock is traded, subject, in each case, to official notice of issuance, prior to the Effective Time. Reasonable Best Efforts. Pursuant to the terms and conditions of the Merger Agreement, each party to the Merger Agreement will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the Merger Agreement. STB Approval. Pursuant to the Merger Agreement, Parent on the one hand and the Company on the other shall, and each shall cause its subsidiaries to, subject to the following sentences, cooperate with one another to prepare and present to the STB, as soon as practicable, all filings and other presentations in connection with seeking any STB approval, exemption or other authorization necessary to consummate the transactions contemplated by the Merger Agreement, prosecute such filings and other presentations with diligence, diligently oppose any objections to, appeals from or petitions to reconsider or reopen any such STB approval by Persons not party to the Merger 30 33 Agreement, and take all such further action as in the reasonable judgment of Parent and the Company may facilitate obtaining a final order or orders of the STB approving such transactions consistent with the Merger Agreement and the transactions contemplated therein. Subject to consultations with the Company and after giving good faith consideration to the views of the Company, Parent shall have final authority over the development, presentation and conduct of the STB case, including over decisions as to whether to agree to or acquiesce in conditions. The Company shall take no regulatory or legal action in connection with the STB without Parent's consent. Public Announcements. The Merger Agreement provides that Parent and the Company will consult with each other before issuing any press release or making any public statement with respect to the Merger Agreement and the transactions contemplated thereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. Dividends. The Merger Agreement provides that after the date of the Merger Agreement, each of Parent and the Company shall coordinate with the other the payment of dividends with respect to the shares of Parent Common Stock and the Shares and the record dates and payment dates relating thereto, it being the intention of the parties thereto that holders of shares of Parent Common Stock and Shares shall not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to their Parent Common Stock and/or Shares or any shares of Parent Common Stock that any such holder receives in exchange for Shares in connection with the Merger. Auditors' Letters. The Merger Agreement provides that the Company and Parent each shall use all reasonable best efforts to cause to be delivered to the other party and such other party's directors a letter of its independent auditors, dated the date on which the Form F-4 (described below)shall become effective, and addressed to the other party and such other party's directors, in form and substance customary for "comfort" letters delivered by independent public accountants in connection with registration statements similar to the Form F-4. Treatment of Company Employees and Directors. In addition to continuing existing compensation and benefits programs for Company employees, Parent and the Company have agreed that a bonus pool of $5 million will be created by the Company to provide bonuses aimed at retaining key employees of the Company after the Merger. As a result of the transactions contemplated by the Merger Agreement, a number of executive officers of the Company who are covered by existing Employment Security Agreements will be entitled to receive between two and three years of severance benefits (depending on job grade) if, within two years, their employment is terminated by the Company without cause or they resign with good reason. Under the Merger Agreement Parent and the Company have agreed to take measures to amend the Employment Security Agreements so that the covered executives will be entitled to additional gross-up payments to reimburse them for any "golden parachute" excise taxes imposed following a termination of their employment in these circumstances. The Merger Agreement also provides that the Company's Director Retirement Plan will be terminated as of the Control Date and the directors will be paid the benefits they have accrued thereunder, subject to their right to elect to defer those payments. Treatment of Company Stock Options and Restricted Stock Awards. Prior to the Offer all outstanding employee and director stock options and restricted stock awards to purchase Shares granted under any employee or director stock option or compensation plan or arrangement of the Company (except certain director options) will become fully exercisable. Parent and the Company have agreed to develop a procedure to permit the holders of options to exercise such options and tender the underlying Shares in the Offer. Any employee or director options which are not exercised prior to the Merger will be converted into Parent Options as described in "Stock Options" above. Preparation of the Form F-4; Proxy Statement; Stockholders' Meeting. The Merger Agreement provides that as soon as practicable following the date of the Merger Agreement, the Company and Parent shall prepare and file with the SEC the Form F-4 pursuant to the Securities Act, which will 31 34 include the Company's proxy or information statement. Parent will make all necessary filings with Canadian securities authorities and relevant Canadian stock exchanges with respect to the Parent Common Stock to be issued in connection with the Merger. Each of the Company and Parent shall use its reasonable best efforts to have the Form F-4 declared effective under the Securities Act as promptly as practicable after such filing. The Company will use its reasonable best efforts to cause the Company proxy statement or information statement to be mailed to its stockholders as promptly as practicable after consummation of the Offer and effectiveness of the Form F-4 under the Securities Act. Parent shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process) required to be taken under any applicable state securities laws in connection with the issuance of Parent Common Stock pursuant to the Merger Agreement and the Company shall furnish all information concerning the Company and the holders of the Shares as may be reasonably requested in connection with any such action. No filing of, or amendment or supplement to, the Form F-4 or the proxy or information statement will be made by a party without providing the other party the opportunity to review and comment thereon. Parent will advise the Company, promptly after it receives notice thereof, of the time when the Form F-4 has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or any request by the SEC for additional information. If at any time prior to the Effective Time any information relating to the Company or Parent, or any of their respective Affiliates, officers or directors, should be discovered by the Company or Parent which should be set forth in an amendment or supplement to the Form F-4 or the Company proxy or information statement so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of the Company and if applicable, Parent. Upon consummation of the Offer and the effectiveness of the Form F-4, the parties understand that, pursuant to the Voting Trust Agreement, the trustee of the Voting Trust will effect the approval of the stockholders of the Company of the Merger Agreement by taking action by written consent of the stockholders of the Company in lieu of calling a meeting of stockholders pursuant to, and in accordance with, the requirements set forth in Section 228 of the DGCL or, if a meeting of stockholders of the Company is required, to vote the Shares held in the Voting Trust in favor of the adoption of the Merger Agreement at such meeting. Conditions of the Offer. See Section 16. Conditions to the Merger. Under the Merger Agreement, the respective obligations of the parties to consummate the Merger at the Effective Time are subject to the satisfaction of the following conditions: (a) if required by the DGCL, the Merger Agreement shall have been adopted by the stockholders of the Company at a meeting of the Company stockholders (or by taking action by written consent in lieu of such a meeting) in accordance with the DGCL; (b) the waiting period under the HSR Act (if any) relating to the Merger shall have expired; and (c) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger. Termination. The Merger Agreement provides that it may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any adoption of the Merger Agreement by the Company's stockholders): 32 35 (a) by mutual written consent of the Company and Parent; (b) by either the Company or Parent, if any law or regulation makes consummation of the Merger illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining Parent or the Company from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable; (c) by either the Company or Parent, if (i) the Offer shall have expired or been terminated and Purchaser shall not have purchased Shares pursuant to the Offer or (ii) Purchaser shall not have purchased Shares pursuant to the Offer prior to May 29, 1998; provided, however, that the right to terminate the Merger Agreement pursuant to this provision shall not be available to any party whose failure to perform any of its obligations under the Merger Agreement (including Purchaser's failure to purchase the Shares pursuant to the terms and conditions of the Offer) results in the failure of the Offer to be consummated; provided further that this clause (c) shall not apply if Purchaser shall have elected to terminate the Offer and proceed with the Merger (see "Alternative Transaction Structures"); (d) by Parent, prior to the earlier of (x) the consummation of the Offer (if the Offer is consummated) or (y) the adoption of the Merger Agreement by the Company stockholders, if (i) the Board of Directors of the Company shall withdraw, modify or change its recommendation of the Merger Agreement, the Merger or the Offer in a manner adverse to Parent, it being understood and agreed that a communication by the Board of Directors of the Company to the Company's stockholders pursuant to Rule 14d-9(e)(3) of the Exchange Act (or any similar communication to stockholders of the Company in connection with the amendment of a tender or exchange offer) shall not be deemed to constitute a withdrawal, modification or change of its recommendation of the Merger Agreement, the Merger or the Offer; (ii) the Board of Directors of the Company shall approve or recommend an Acquisition Proposal; or (iii) the Company shall have entered into, or shall have publicly announced its intention to enter into, a definitive agreement with respect to an Acquisition Proposal (it being understood and agreed that the delivery of written notice of the Company's intention to enter into a definitive agreement with respect to an Acquisition Proposal (see "Other Offers") and any subsequent public announcement of such intention shall not entitle Parent to terminate the Merger Agreement pursuant to this clause (d) unless the Company enters into a definitive agreement with respect to such Acquisition Proposal); (e) by the Company, prior to the earlier of (x) the consummation of the Offer or (y) the adoption of the Merger Agreement by the stockholders of the Company, if the Board of Directors of the Company shall have entered into or shall have publicly announced its intention to enter into, a definitive agreement with respect to an Acquisition Proposal, if the Board of Directors concludes in good faith, based on the advice of outside counsel, that such action is reasonably necessary in order for the Board of Directors to act in a manner consistent with the Board's fiduciary duties under applicable law; provided, that the right to terminate the Merger Agreement under this provision shall not be available to the Company unless (x) the Company has complied in all material respects with certain obligations under the Merger Agreement (see "Other Offers"), and (y) concurrently with such termination, the Company enters into a definitive agreement to effect the Acquisition Proposal and pays Parent a break-up fee (see "Break-up Fee", below); (f) by Parent, prior to the earlier of (x) consummation of the Offer (if the Offer is consummated) or (y) the adoption of the Merger Agreement by the stockholders of the Company, if any person or group (as defined in Section 13(d)(3) of the Exchange Act) (other than Parent, any of its subsidiaries, or an Affiliate thereof) shall have become the beneficial owner (as defined under Rule 13d-3 promulgated under the Exchange Act) of at least 40% of the outstanding Shares; 33 36 (g) by the Company, prior to the earlier of (x) consummation of the Offer or (y) the adoption of the Agreement by the stockholders of the Company, if Parent or Purchaser shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (i) would give rise to the failure of the conditions of the Merger and (ii) either is not reasonably capable of being cured or, if it is reasonably capable of being cured, has not been cured within the earlier of (x) 10 days after giving of written notice to Parent of such breach or (y) the Expiration Date (provided that the Company shall not have the right to terminate the Merger Agreement if the Company is then in breach of its representations, warranties, covenants or other agreements contained in the Merger Agreement); (h) by Parent, prior to the earlier of (x) consummation of the Offer (if the Offer is consummated) or (y) the adoption of the Agreement by the stockholders of the Company, if the Company shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (i) would give rise to the failure of the conditions of the Merger and (ii) either is not reasonably capable of being cured or, if it is reasonably capable of being cured, has not been cured within the earlier of (x) 10 days after giving of written notice to the Company of such breach or (y) the Expiration Date (provided that Parent shall not have the right to terminate the Merger Agreement if Parent (or Purchaser) is then in breach of its representations, warranties, covenants or other agreements contained in the Merger Agreement); or (i) by either the Company or Parent if, during any five consecutive trading day period during the period from the commencement of the Offer until the business day prior to the expiration of the Offer the average closing price of the Parent Common Stock on the NYSE is less than $38.00; provided that any exercise of the right to terminate pursuant to this paragraph with respect to any five consecutive trading day period shall only be effective if notice of such termination is given to the other party prior to the earlier of (i) 72 hours after the close of trading on the fifth such consecutive day and (ii) the expiration date of the Offer. Fees and Expenses. Except as set forth in the next paragraph, all fees and expenses incurred in connection with the Offer, the Merger, the Merger Agreement, and the transactions contemplated by the Merger Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated. Break-up Fee. The Company agrees to pay Parent a fee in immediately available funds equal to $72,000,000: (i) concurrently with the termination of the Merger Agreement if it shall be terminated pursuant to paragraph (d), (e), (f) or (h) (with respect to a breach of certain obligations under the Merger Agreement, see "Other Offers") above under "Termination"; or (ii) within two business days of the execution of a definitive agreement with respect to any Acquisition Proposal if the Company enters into such a definitive agreement within 15 months after the termination of the Merger Agreement pursuant to paragraph (c) under "Termination", above and an Acquisition Proposal was publicly announced prior to the termination of the Merger Agreement pursuant to paragraph (c). Amendments and Waivers. The Merger Agreement provides that before or after its adoption by the stockholders of the Company, any provision of the Merger Agreement may be amended or waived prior to the Control Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the parties thereto or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the adoption of the Merger Agreement by the stockholders of the Company, there shall not be made any amendment that by law requires further approval by stockholders of the Company without the further approval of such stockholders and, provided, further, 34 37 that no such amendment of the Merger Agreement, the Voting Trust Agreement or any other agreement entered into in connection with the Merger Agreement shall be effected after the closing of the Offer and prior to the Control Date unless there are then in office two or more Continuing Directors and such amendment is approved by a majority of such Continuing Directors, it being understood and agreed that the Company and its Board of Directors shall use reasonable best efforts to ensure that, at all times prior to the Control Date, at least two Continuing Directors remain in office. Following consummation of the Offer and prior to the Control Date, any amendment to the certificate of incorporation or by-laws of the Company or to the Merger Agreement or to the Voting Trust Agreement, any termination of the Merger Agreement by the Company or by the Company and Parent under paragraph (a) under "Termination" above, any waiver of any of the Company's rights under the Merger Agreement (including certain waivers or consents required in connection with the Voting Trust) and any other consent or action by the Board of Directors of the Company thereunder, shall not be effected unless there are then in office two or more Continuing Directors and such approval is approved by a majority of such Continuing Directors, it being understood and agreed that the Company and its Board of Directors shall use commercially reasonable best efforts to ensure that, at all times prior to the Control Date, at least two Continuing Directors remain in office. CONFIDENTIALITY AGREEMENT On March 13, 1997, Parent and the Company entered into an Agreement for Non-disclosure of Proprietary Information and Standstill (the "Confidentiality Agreement") under which the Company and Parent agreed to provide certain confidential information relating to their respective operations to each other. Pursuant to the Confidentiality Agreement, Parent agreed that Parent and its representatives would hold non-public information received from the Company under the Confidentiality Agreement in confidence, except to the extent that disclosure is required to evaluate a possible business combination as specified in the Confidentiality Agreement. A copy of the Confidentiality Agreement is filed as an exhibit to the Schedule 14D-1 and incorporated herein by reference, and the foregoing summary of the Confidentiality Agreement is qualified in its entirety by reference thereto. INVESTMENT COMMITMENT AGREEMENTS In connection with the Offer and the Merger, Mr. Gilbert H. Lamphere, the Company's Chairman of the Board of Directors, and Mr. Alexander P. Lynch (a Director of the Company) have both entered into an Investment Commitment Agreement pursuant to which Messrs. Lamphere and Lynch have each agreed (i) to permit all options to purchase Shares then owned by them to be amended and converted into options to purchase shares of Parent Common Stock in accordance with the terms of the Merger Agreement, (ii) that at any meeting of stockholders of the Company held to adopt the Merger Agreement, they will vote all of their Shares in favor of such action and (iii) (in the case of Mr. Lamphere only) that, within 90 days of the Effective Time (provided that such period shall be extended for any period during which he is precluded from purchasing shares of Parent Common Stock pursuant to applicable law), he will have acquired at least 98,150 shares of Parent Common Stock pursuant to the Merger or pursuant to open market purchases, provided that Mr. Lamphere will not be obligated to invest an aggregate amount in excess of $5,300,000 of proceeds from the Offer and/or the Merger (for this purpose (x) any shares of Parent Common Stock issued to Mr. Lamphere pursuant to the Merger shall be deemed to represent an investment in an amount equal to the product of the number of shares of Parent Common Stock so received and the average closing trading price per share of Parent Common Stock on the NYSE for the 5 trading days immediately following the date of receipt and (y) any acquisitions of shares of Parent Common Stock by trusts for the descendants of Mr. Lamphere shall ratably decrease Mr. Lamphere's required investment in Parent Common Stock). Each Investment Commitment Agreement will automatically terminate, without action by either party thereto, upon the termination of the Merger Agreement in accordance with its terms or, if 35 38 Purchaser has elected to amend the terms of the Offer to an offer for all of the outstanding Shares (see "Alternative Transaction Structures"). VOTING TRUST AGREEMENT Pursuant to the Voting Trust Agreement to be entered into by and among Parent, Purchaser and a voting trustee that is expected to be a banking corporation (the "Trustee"), the Trustee will agree to act as trustee in respect of the Voting Trust. In such capacity, the Trustee will vote all Shares acquired by Purchaser in the Offer or otherwise approve the Merger, in favor of any proposal necessary to effectuate Parent's acquisition of the Company pursuant to the Merger Agreement, and, so long as the Merger Agreement is in effect (subject to certain exceptions), against any other proposed merger, business combination or similar transaction involving the Company. On other matters (including the election or removal of directors), the Trustee generally will vote the Shares in the Trustee's sole discretion unless a holder of a Trust Certificate with the prior written approval of the STB directs the Trustee as to any such vote. Pending the termination of the Voting Trust, the Trustee will pay over to Purchaser all cash dividends and cash distributions paid on the Trust Stock. The Voting Trust Agreement will provide that the Trustee shall take all actions reasonably requested by Parent with respect to any proposed sale or other disposition of the whole or any part of the Trust Stock by Parent subject to all necessary regulatory approvals, if any. The Voting Trust Agreement also will provide that, in the event the STB approves or exempts the Merger or a similar transaction, or in the event that the law is amended to allow Purchaser, Parent or their affiliates to acquire control of the Company without obtaining STB or other governmental approval (and upon delivery of an opinion of independent counsel that no order of the STB or other governmental authority is required), the Trustee will either transfer the Trust Stock to Purchaser, or if shareholder approval has not previously been obtained, vote the Trust Stock in favor of the Merger. It is anticipated that the Voting Trust Agreement will provide that, in the event that the STB does not approve Parent's acquisition of control of the Company, Parent will use its best efforts to sell the Trust Stock in the manner described above during the succeeding two-year period. Any such disposition shall be subject to any jurisdiction of the STB to oversee Parent's divestiture of Trust Stock. In connection with such an event, the Trustee would continue to perform its duties under the Voting Trust Agreement and, if Parent fails to so sell or distribute the Trust Stock, the Trustee will as soon as practicable sell the Trust Stock for cash to one or more eligible purchasers in the manner described above for such price as the Trustee in its discretion shall deem reasonable after consultation with Parent. An "eligible purchaser" is a person or entity not affiliated with Parent and that has all necessary regulatory authority, if any, to purchase the Trust Stock. Pursuant to the Voting Trust Agreement, Parent will agree to cooperate with the Trustee in so disposing of the Trust Stock and the Trustee has agreed to act in accordance with any direction made by Parent as to any specific terms or method of disposition, to the extent not inconsistent with any of the terms of the Voting Trust Agreement and with the requirements of the terms of any STB or court order. The proceeds of the sale would be distributed to Parent or its affiliates. The Voting Trust Agreement provides that the Trustee shall receive reasonable and customary compensation and indemnification from Parent and Purchaser. Pursuant to the Merger Agreement, the Voting Trust Agreement may not be modified or amended without the prior written approval of the Company unless such modification or amendment is not inconsistent with the Merger Agreement and is not adverse to the Company and its stockholders and would not reasonably be expected to have an adverse effect on receipt of a favorable informal advisory opinion from the staff of the STB to the effect that the proposed use of the Voting Trust will preclude unlawful control of the Company by Parent. 36 39 Upon execution of the Voting Trust Agreement, Parent will request the staff of the STB to render an informal written opinion that the use of the Voting Trust is consistent with the policies of the STB. See Section 16. 14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should (i) split, combine or otherwise change the Shares or its capitalization, (ii) issue or sell any additional securities of the Company or otherwise cause an increase in the number of outstanding securities of the Company or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then, without prejudice to Purchaser's rights under Sections 1 and 16, Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the purchase price and other terms of the Offer and the Merger, including, without limitation, the amount and type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare or pay any dividend on the Shares, other than regular quarterly dividends, or make any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's rights under Sections 1 and 16, (i) the purchase price per Share payable by Purchaser pursuant to the Offer will be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution or right to be received by the tendering shareholders will be received and held by such tendering shareholders for the account of Purchaser and will be required to be promptly remitted and transferred by each such tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by Purchaser in its sole discretion. The Company has agreed in the Merger Agreement that it will not pay any dividends, other than regular quarterly dividends, on its capital stock, including the Shares, prior to the Effective Time without the consent of Parent. The Company has also agreed that, without the consent of Parent, it will not (a) take certain actions that would change the number of shares of its capital stock outstanding or result in the reclassification of any of its capital stock, or (b) purchase, retire or otherwise acquire any shares of its capital stock, or (c) issue, pledge or otherwise encumber its capital stock or any securities convertible into or representing the right to acquire its capital stock, with certain exceptions set forth in the Merger Agreement. See Section 13. 15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. Purchaser expressly reserves the right to extend the period of time during which the Offer is open if any conditions to the Offer are not satisfied by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension or to amend the Offer in any respect by making a public announcement of such amendment. There can be no assurance that Purchaser will exercise its right to extend or amend the Offer. For a description of each of the parties' right to extend the period of time during which the Offer is open and to amend or delay the Offer see Sections 1 and 16. If Purchaser increases by more than 2% of the outstanding Shares or decreases the percentage of Shares being sought or increases or decreases the consideration to be paid for Shares pursuant to the Offer and the Offer is scheduled to expire at any time before the expiration of a period of 10 business days from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified below, the Offer will be extended until the expiration 37 40 of such period of 10 business days. If Purchaser makes a material change in the terms of the Offer (other than a change in price or percentage of securities sought) or in the information concerning the Offer, or waives a material condition of the Offer, Purchaser will extend the Offer, if required by applicable law, for a period sufficient to allow holders of Shares to consider the amended terms of the Offer. In a published release, the SEC has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of such offer and that the waiver of a condition such as the Minimum Condition is a material change in the terms of an offer. The release states that an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to securityholders, and that if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of 10 business days may be required to allow adequate dissemination and investor response. The term "business day" shall mean any day other than Saturday, Sunday or a federal holiday and shall consist of the time period from 12:01 A.M. through 12:00 Midnight, New York City time. Purchaser also reserves the right, in its sole discretion, in the event any of the conditions specified in Section 16 shall not have been satisfied and so long as Shares have not theretofore been accepted for payment, to delay (except as otherwise required by applicable law) acceptance for payment of or payment for Shares or to terminate the Offer and not accept for payment or pay for Shares. If Purchaser extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, on behalf of Purchaser, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in Section 4. The reservation by Purchaser of the right to delay acceptance for payment of or payment for Shares is subject to applicable law, which requires that Purchaser pay the consideration offered or return the Shares deposited by or on behalf of holders of Shares promptly after the termination or withdrawal of the Offer. Any extension, termination or amendment of the Offer will be followed as promptly as practicable by a public announcement thereof. Without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser will have no obligation (except as otherwise required by applicable law) to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. In the case of an extension of the Offer, Purchaser will make a public announcement of such extension no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. 16. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, Parent and Purchaser shall not be required to accept for payment or pay for any Shares, and may terminate the Offer, if (i) by the expiration of the Offer less than 50.1% of the outstanding Shares (on a fully diluted basis) have been tendered pursuant to the Offer and not withdrawn, (ii) the applicable waiting period (if any) under the HSR Act shall not have expired or been terminated, (iii) the staff of the STB shall not have given Parent a favorable informal advisory opinion to the effect that the proposed use of the Voting Trust will preclude unlawful control of the Company by Parent or (iv) at any time on or after February 10, 1998, and prior to the acceptance for payment of Shares, any of the following conditions exist: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the making of the Offer, challenging or seeking to make illegal the Voting Trust, the acceptance for payment of or payment for some of or all the Shares by Parent or the consummation by Parent of the Merger, seeking to 38 41 obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Offer or the Merger (including the Voting Trust), (ii) except for the Voting Trust, seeking to restrain or prohibit Parent's ownership or operation (or that of its respective subsidiaries or affiliates) of all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Parent and its subsidiaries, taken as a whole, or to compel Parent or any of its subsidiaries or Affiliates to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or of Parent and its subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking to impose or confirm material limitations on the ability of Parent or any of its subsidiaries or Affiliates effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by Parent or any of its subsidiaries or Affiliates on all matters properly presented to the stockholders of the Company, or (iv) seeking to require divestiture by Parent or any of its subsidiaries or Affiliates of any such Shares; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Offer or the Merger (including the Voting Trust), by any court, government or governmental authority or agency, domestic or foreign (other than (i) the application of the waiting period provisions of the HSR Act to the Offer or the Merger and (ii) the waiting period prior to receipt of STB approval or exemption with respect to the exercise of control by Parent over the Railroad Subsidiaries), that would reasonably be likely, directly or indirectly, to result in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of the Company or any of its subsidiaries that would reasonably be expected to have a Material Adverse Effect with respect to the Company; or (d) the Company shall have breached or failed to perform in any material respect any of its covenants or agreements under the Merger Agreement, or any of the representations and warranties of the Company set forth in the Merger Agreement shall not be true in any material respect when made or at any time prior to consummation of the Offer as if made at and as of such time (unless such representation or warranty is made only as of a specific date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality or "material adverse effect") does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or (e) the Merger Agreement shall have been terminated in accordance with its terms; which, in the sole judgment of Parent in any such case, and regardless of the circumstances (including any action or omission by Parent) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. 17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General Based on its examination of publicly available information filed by the Company with the SEC and other publicly available information concerning the Company, Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by Purchaser's acquisition of Shares as contemplated herein or, except as set forth below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser currently contemplates that, except as described below 39 42 under "State Takeover Statutes", such approval or other action will be sought. Except as described under "Antitrust" there is, however, no current intent to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that if such approvals were not obtained or such other actions were not taken adverse consequences might not result to the Company's business or certain parts of the Company's business might not have to be disposed of, any of which could cause Purchaser to elect to terminate the Offer without the purchase of Shares thereunder. Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See Section 16. State Takeover Statutes A number of states have adopted laws which purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or which have substantial assets, shareholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. Except as described herein, Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or any merger or other business combination between Purchaser or any of its affiliates and the Company and has not complied with any such laws. To the extent that certain provisions of these laws purport to apply to the Offer or any such merger or other business combination, Purchaser believes that there are reasonable bases for contesting such laws. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining shareholders where, among other things, the corporation is incorporated in, and has a substantial number of shareholders in, the state. 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 in that they would subject such 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 the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. If any government official or third party should seek to apply any state takeover law to the Offer or any merger or other business combination between Purchaser or any of its affiliates and the Company, Purchaser will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover statutes is applicable to the Offer or any such merger or other business combination and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or any such merger or other business combination, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of Shares, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer or any such merger or other business combination. In such case, Purchaser may not be obligated to accept for payment or pay for any tendered Shares. See Section 16. 40 43 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 notice and waiting period requirements of the HSR Act should not apply to the Offer and the Merger to the extent that the Offer and the Merger are subject to approval by the STB, provided that information and documentary material filed with the STB in connection with the seeking of STB approval of the Merger are contemporaneously filed with the Antitrust Division and the FTC. Parent intends to comply with these contemporaneous filing requirements and therefore believes that the notice and waiting period requirements should not apply to the Offer and the Merger. Parent and Purchaser will request the Premerger Notification Office of the FTC to confirm this understanding. If the notice and waiting period requirements of the HSR Act do apply to the Offer and the Merger, Parent, Purchaser and the Company will take all necessary action to comply with those requirements. STB Matters; The Voting Trust Certain activities of subsidiaries of the Company are regulated by the STB. Provisions of subtitle IV, title 49 of the United States Code require approval of, or the granting of an exemption from approval by, the STB for the acquisition of control of two or more carriers subject to the jurisdiction of the STB ("Carriers") by a person that is not a Carrier and for the acquisition or control of a Carrier by a person that is not a Carrier but that controls any number of Carriers. STB approval or exemption is required for, among other things, Parent's acquisition of control of the Company. Parent and Purchaser intend, simultaneous with the acquisition of Shares pursuant to the Offer, to deposit the Shares pursuant to the Offer in the Voting Trust and, subsequently to deposit the stock of the Surviving Company (the "Trust Stock") in order to ensure that Parent and its affiliates do not acquire and directly or indirectly exercise control over the Company and its affiliates prior to obtaining necessary STB approval or exemption. STB approval of Parent's acquisition of control of the Company is not a condition to the Offer or the Merger. The Offer is conditioned upon the issuance by the STB staff of an informal, nonbinding opinion that the use of the Voting Trust is consistent with the policies of the STB against unauthorized acquisitions of control of a Carrier. Parent will request the staff of the STB to issue such an opinion. Under STB regulations that have been in effect since 1979, the STB staff has the power to issue such opinions. The proposed Voting Trust Agreement is modeled closely upon voting trust agreements that have been approved by the STB. However, there can be no assurance that the STB will not seek changes in, or request public comment regarding, the Voting Trust Agreement. It is possible that the Department of Justice or railroad competitors of Parent and the Company, or others, may argue that Purchaser should not be permitted to use the voting trust mechanism to acquire Shares prior to final STB approval of acquisition of control of the Company. Purchaser believes it is unlikely that such arguments would prevail, but there can be no assurance in this regard, nor can there be any assurance that if such arguments are made, there will not be a delay in obtaining a favorable STB staff opinion regarding the Voting Trust Agreement. Pursuant to the terms of the Voting Trust Agreement, it is expected that the Trustee would hold such Shares until (i) the receipt of STB approval or (ii) the Shares or Trust Stock is disposed of. The Voting Trust Agreement that has been submitted to the staff of the STB for approval provides that Trustee will have sole power to vote the Shares in the Trust, will vote those Shares in favor of the Merger and, so long as the Merger Agreement is in effect, against any other acquisition transaction, will generally vote the Shares or the Trust Stock in favor of any permitted disposition of the Shares or the Trust Stock and, on all other matters, will vote the Shares or the Trust Stock in the Trustee's discretion unless a holder of a Trust Certificate with the prior written approval of the STB directs the Trustee as to any such vote. The Voting Trust Agreement contains other terms and conditions designed to ensure that neither Purchaser nor Parent will control the Company during the 41 44 pendency of the STB proceedings. In addition, the Voting Trust Agreement provides that Parent or its affiliates will be entitled to receive any cash dividend paid by the Company. STB Matters; Acquisition of Control Set forth below is information relating to the approval by STB of the acquisition of control over the Company by Parent and Purchaser. As soon as practicable after the execution of the Merger Agreement, Parent and the Company and their railroad affiliates plan to file an application (the "STB Application") seeking approval of the STB for the acquisition of control over the Company and its affiliates by Parent and its affiliates. Under applicable law and regulations, the STB will hold a public hearing on such application, unless it determines that a public hearing is not necessary in the public interest. In ruling on the STB application, it is expected that the STB will consider at least the following: (a) the effect of the proposed control transaction on the adequacy of transportation to the public; (b) the effect on the public interest of including, or failing to include, other rail carriers in the area involved in the proposed transaction; (c) the total fixed charges that result from the proposed transaction; (d) the interest of rail carrier employees affected by the proposed transaction; and (e) whether the proposed transaction would have an adverse effect on competition among rail carriers in the affected region or in the national rail system. The STB has the authority to impose conditions on its approval of a control transaction to alleviate competitive or other concerns. If such conditions are imposed, Parent can elect to consummate the control transaction subject to the conditions or can elect not to do so and instead sell or otherwise effect the disposition of the Trust Stock. There is no assurance that STB approval will be obtained or obtained on terms acceptable to Parent. Three of the five factors listed above are, in Parent's view, unlikely to affect whether the STB application is approved by the STB. As to factor (b) -- inclusion of other carriers -- the STB disfavors this remedy, it has rarely been requested, and Parent believes it is unlikely to be requested by any railroad in a Parent/Company proceeding. As to factor (c) -- effect on fixed charges -- the capital structure of the resulting company will be sufficiently strong that this factor is unlikely, in Parent's view, to be given weight by the STB in deciding whether to approve a combination of the Company and Parent. As to factor (d) -- the interest of affected carrier employees -- the STB has adopted a standard set of labor protective conditions -- known as the New York Dock conditions -- which it imposes in rail merger and control transactions, and Parent expects that those conditions would be imposed upon a merger of Purchaser and the Company and that this would not affect approval of the transaction. The remaining two factors -- factor (a) -- effect on the adequacy of transportation -- and factor (e) effect on rail competition -- are reflected in the public interest balancing test that the STB applies in reviewing railroad consolidations like the proposed combination of the rail systems of Parent and the Company. On the one hand, the STB considers the public benefits of the transaction in terms of better service to shippers, efficiencies, cost savings and the like. On the other hand, the STB considers any public harms from the transaction. The principal harm of concern to the STB (and the principal issue that is likely to be raised by parties either opposing the approval of a combination of Parent and the Company or seeking the imposition of conditions thereto) is reduction in competition. In applying the public interest balancing test, the STB is guided by Congress' intent to encourage mergers, consolidations, and joint use of facilities that tend to rationalize and improve the Nation's rail system. In light of the policies of the STB expressed in its 1996 decision relating to the combination of the Union Pacific and Southern Pacific Railroads, Parent is willing to provide competitive access to another railroad in those situations, if any, where Parent and the Company now are considered to be the only rail competitors. Parent is not aware of any such situation. Such access may take the form of a grant of trackage rights over rail properties, or other forms, any of which could diminish the value to Parent of its rail properties. The STB may impose such arrangements, as conditions to its approval of the combination, and may require other arrangements regarding rail competition or 42 45 other aspects of the public interest, which could be more burdensome, also as conditions to its approval of the combination. Parent and the Company intend to present to the STB their case that the acquisition of control of the Company by Parent satisfies the public interest balancing test. First, Parent and the Company will seek to show that a combination of the Company and Parent has significant public benefits. Second, Parent and the Company will seek to show that a combination of the Company and Parent will have no significant adverse effect on rail competition and indeed will strengthen such competition. While Parent and the Company will seek to present a highly persuasive case, there can be no assurance that the STB application will not be denied, or will not be granted subject to conditions that are so onerous that the combination is not consummated. Under existing law, the STB is required to enter a final order with respect to the STB application within approximately 15 months after such application is accepted. However, the STB is permitted to process such cases more quickly and the applicants will request a shorter schedule. Under existing law, other railroads and other interested parties may seek to intervene to oppose the STB Application or to seek protective conditions in the event approval by the STB is granted. In addition, any appeals from the STB final order might not be resolved for a substantial period of time after the entry of such order by the STB. Pending receipt of STB approval, it is expected that the business and operations of the Company will be conducted in the usual and ordinary course, and the Company's employees and management will continue in their present positions except as set forth in Section 12. Certain Litigation The Company has advised Parent that, on February 11, 1998, an alleged owner of Shares filed a "Class Action Complaint" entitled Jay Spinner against Illinois Central Corp. et al. in the Court of Chancery of the State of Delaware against the Company and members of its Board of Directors arising out of the Company's announcement that it has reached an agreement to be acquired by Parent. Although the body of the complaint purports to list Parent as a defendant, Parent is not listed as a defendant in the caption of the complaint. The complaint alleges, inter alia, that the individual defendants breached fiduciary duties allegedly owed to public holders of Shares by, among other things, not adequately evaluating the value of the Company or the terms of the transactions contemplated by the Offer before approving its terms. The plaintiff brings the action on behalf of a purported class of all holders of Shares (except the defendants and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury allegedly arising from defendants' actions as alleged in the complaint. The plaintiff alleges that he and members of the purported class will suffer damage if they receive the Offer consideration, which the complaint characterizes as unfair and inadequate. The plaintiff has demanded judgment: (1) declaring, inter alia, that the action is a proper class action, (2) enjoining or rescinding the transactions contemplated by the Offer, and (3) requiring the Board of Directors of the Company to place the Company up for auction and/or conducting a market check. 18. FEES AND EXPENSES. Goldman, Sachs & Co. ("Goldman Sachs") and Schroder & Co. Inc. ("Schroders") are acting as Dealer Managers in connection with the Offer and serving as financial advisor to Parent and Purchaser in connection with the proposed acquisition of the Company. In consideration of Goldman Sachs acting in such capacities, Parent has agreed to pay Goldman Sachs as follows: (i) if at least 50% of the outstanding Shares or the assets (based on the book value thereof) of the Company are acquired by Parent in one or more transactions, Goldman Sachs will be entitled to receive a fee equal to $9 million, (ii) if less than 50% but at least 5% of the outstanding Shares or the assets (based on the book value thereof) of the Company are acquired by Parent in one or more 43 46 transactions, Goldman Sachs will be entitled to receive a mutually agreeable fee of not less than $4 million and (iii) if less than 5% of the outstanding Shares or the assets (based on the book value thereof) of the Company are acquired by Parent in one or more transactions, Goldman Sachs will be entitled to receive a mutually agreeable fee. In the event that the Merger Agreement is terminated, Goldman Sachs will be entitled to a transaction fee of 10% of any termination fee payable to Parent. In addition, Parent and Purchaser have agreed to reimburse Goldman Sachs for all reasonable out-of-pocket expenses incurred, including reasonable fees of its counsel, and to indemnify Goldman Sachs against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities law. Goldman Sachs have from time to time, and continue to, render various investment banking services to Parent and its affiliates, for which they are paid customary fees. As compensation for Schroders' services, Parent has agreed to pay Schroders (i) a retainer fee of $100,000 per month, up to a maximum of five months; (ii) an opinion fee of $500,000 if applicable; (iii) a transaction fee of $6 million less any fee paid pursuant to clauses (i) and (ii) above, payable on closing of the Merger; and (iv) 5% of the aggregate of any "break-up fee" less any amounts paid under clauses (i), (ii) and (iii) above upon receipt of such fee by Parent or Purchaser. Parent has also agreed to reimburse Schroders for certain reasonable out-of-pocket expenses incurred with the Offer including fees and expenses of counsel and to indemnify Schroders against certain liabilities in connection with the Offer including liabilities under the federal securities laws. Schroders has rendered various investment banking and advisory services to Parent in the past for which it has received customary compensation. Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the federal securities laws. In addition, Harris Trust Company of New York has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as set forth above, Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. 19. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Purchaser is not aware of any jurisdiction in the United States in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. To the extent Purchaser becomes aware of any state law that would limit the class of offerees in the Offer, subject to the terms of the Merger Agreement, Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction the securities, blue sky or other laws of which 44 47 require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of Purchaser by the Dealer Managers or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Purchaser has filed with the SEC a Tender Offer Statement on Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be examined at and copies may be obtained from the offices of the SEC in the manner set forth in Section 8 of this Offer to Purchase (except that such information will not be available at the regional offices of the SEC). February 13, 1998 BLACKHAWK MERGER SUB, INC. 45 48 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth (i) the name, current business or residence address and present principal occupation or employment, (ii) material occupations, positions, offices or employments and business addresses thereof for the past five years and (iii) information as to beneficial ownership of Shares of each director and executive officer of Parent. Except for Messrs. Armellino and Davies who are citizens of the United States, each of Parent's directors and executive officers is a citizen of Canada. Except as otherwise indicated, the business address of each director and executive officer of Parent is 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M6. Directors are indicated with an asterisk. None of the persons listed below hold any Shares.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND ADDRESS BUSINESS ADDRESSES THEREOF(1) - -------------------------------------------- ------------------------------------------------- * MICHAEL R. ARMELLINO.................... Limited Partner, The Goldman Sachs Group, L.P. The Goldman Sachs Group, L.P. (investment bankers) 85 Broad Street, 2nd Floor New York, NY 10004 USA * PURDY CRAWFORD.......................... Chairman, Imasco Limited Imasco Limited (consumer goods and services company) Royal Bank Plaza 200 Bay Street North Tower Suite 2000 Toronto, Ontario Canada M5J 2J2 * J.V. RAYMOND CYR........................ Chairman, Telesat Canada & SSIG Group Inc. Telesat Canada & SSIG Group Inc. (telecommunication companies) 1000 de La Gauchetiere Street West Suite 1100 Montreal, Quebec Canada H3B 4Y8 GERALD K. DAVIES........................ Executive Vice-President, Marketing of Parent ROBERT F. DOLAN......................... Senior Vice-President, Corporate Services of Parent KEITH L. HELLER......................... Senior Vice-President, Line Operations of Parent * JAMES K. GRAY........................... Chairman and Chief Executive Officer, Canadian Hunter Exploration Ltd. Canadian Hunter Exploration Ltd. 605 5 Avenue, S.W. (natural gas company) Suite 2800 Calgary, Alberta Canada T2P 3H5
1 49
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND ADDRESS BUSINESS ADDRESSES THEREOF(1) - -------------------------------------------- ------------------------------------------------- * V. MAUREEN KEMPSTON DARKES.............. President and General Manager, General Motors of Canada Limited General Motors of Canada Limited 1908 Colonel Sam Drive (automobile company) Oshawa, Ontario Canada L1H 8P7 * RICHARD H. KROFT........................ President and Chief Executive Officer, Tryton Investment Company Limited Tryton Investment Company Limited 305 Broadway Avenue (private holding company) Suite 720 Winnipeg, Manitoba Canada R3C 3J7 * DENIS LOSIER............................ President and Chief Executive Officer, Assumption Life Assumption Life 770 Main Street (life insurance company) Moncton, New Brunswick Canada E1C 8L1 * THE HON. EDWARD C. LUMLEY............... Vice-Chairman, Nesbitt Burns Inc. Nesbitt Burns Inc. (investment bankers) First Canada Place, 4th Floor Toronto, Ontario Canada M5X 1H3 JACK T. MCBAIN.......................... Executive Vice-President, Operations of Parent. * DAVID G.A. MCLEAN....................... Chairman of the Board of Parent, Canadian National Railway Chairman and Chief Executive Officer, The McLean 935 de La Gauchetiere Street West Group 17th Floor (real estate investment company) Montreal, Quebec Canada H3B 2M9 * DR. EDWARD P. NEUFELD................... Economist 1523 Ballyclare Drive Mississauga, Ontario Canada L5C 1J4 JEAN PIERRE OUELLET..................... Chief Legal Officer and Corporate Secretary of Parent * ROBERT PACE............................. President and Chief Executive Officer, The Pace Group The Pace Group 15 Purcell's Cove Road (private holding company) Halifax, Nova Scotia Canada B3N 1R2 * CEDRIC E. RITCHIE....................... Corporate Director and Former Chairman and Bank of Nova Scotia Chief Executive Officer, Bank of Nova Scotia Scotia Plaza (a chartered bank) 44 King Street West, Suite 3005 Toronto, Ontario Canada M5H 1H1
2 50
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND ADDRESS BUSINESS ADDRESSES THEREOF(1) - -------------------------------------------- ------------------------------------------------- MICHAEL J. SABIA........................ Executive Vice-President and Chief Financial Officer of Parent PAUL M. TELLIER......................... President and Chief Executive Officer of Parent
- --------------- (1) Michael R. Armellino was Chairman, and Chief Executive Officer of Goldman Sachs Asset Management prior to January 1995; Purdy Crawford was Chairman and Chief Executive Officer of Imasco Limited prior to May 1995; J.V. Raymond Cyr was Chairman of Bell Canada between April 1993 and March 1996 and Chairman of BCE Inc. between April 1992 and April 1993; Gerald K. Davies was Vice-President, Marketing of Burlington Northern Railroad between September 1991 and November 1993; Robert F. Dolan was Senior Vice-President, Corporate Resources of John Labatt Ltd. from January 1994 to January 1996 and prior thereto, Vice-President, Human Resources of John Labatt Ltd.; Keith L. Heller was Senior Vice-President, CN East, from August 1995 to April 1997, CN Chief of Transportation between October 1993 and August 1995 and Assistant Vice-President, Ores, Minerals and Metals between August 1992 and October 1993; V. Maureen Kempston Darkes was Vice-President, Corporate Affairs and General Counsel of General Motors of Canada Limited prior to July 1994; Denis Losier was Minister of Economic Development and Tourism (New Brunswick) prior to August 1994; Dr. Edward P. Neufeld was Executive Vice-President, Economic and Corporate Affairs of the Royal Bank of Canada prior to June 1994; Jean Pierre Ouellet was a senior partner at Stikeman, Elliott prior to August 1996; Cedric E. Ritchie was Chairman of the Board of Bank of Nova Scotia until 1995 and Chairman and Chief Executive Officer of said bank until 1993; Michael J. Sabia was Senior Vice-President, Corporate Development of Parent between March 1993 and December 1995, prior thereto, Deputy Secretary to the Cabinet (Plans) of the Privy Council Office (Canada). 2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth (i) the name, current business or residence address and present principal occupation or employment and (ii) material occupations, positions, offices or employments and business addresses thereof for the past five years. The director and executive officers of Purchaser are citizens of Canada and Mrs. Catellier is also a citizen of the United States. The business address of the sole director and the executive officers of Purchaser is 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M6. Neither of the persons listed below holds any Shares.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND ADDRESS BUSINESS ADDRESSES THEREOF - ------------------------------------------ ------------------------------------------------- JEAN PIERRE OUELLET....................... Sole director, President and Treasurer; Chief Legal Officer and Corporate Secretary of Parent BRIGITTE K. CATELLIER..................... Secretary; Senior General Counsel and Associate Secretary of Parent. Before joining Parent in September 1997, partner at Ogilvy Renault in Montreal, Quebec.
3 51 ANNEX A CANADIAN/U.S. GAAP FINANCIAL INFORMATION CANADIAN NATIONAL RAILWAY COMPANY STATEMENT OF INCOME DATA
U.S. CDN./U.S. GAAP GAAP ADJUSTMENTS ------- CDN. GAAP ----------------------- ------------------------------------ AS RECLASS. AND AS (NOTE 2) REPORTED ACCOUNTING RESTATED OTHER CAPITALIZATION -------- CHANGE -------- ----- -------------- ------------ (NOTE 1) IN MILLIONS OF $ CDN YEAR ENDED DECEMBER 31, 1995 Total revenues......................... $ 4,098 $ (144) $ 3,954 $(42) $ 3,912 Operating expenses excluding special charges.............................. 3,658 (144) 3,514 (27) 3,487 Special charges........................ 1,453 1,453 (38) 1,415 ------- ---- ------- ---- ----- Operating income (loss)................ (1,013) -- (1,013) 23 (990) Interest expense....................... (198) (198) 4 (194) Other income........................... 100 100 48 148 Income tax (expense) recovery from continuing operations................ 19 19 19 ------- ---- ------- ---- ----- (Loss) from continuing operations...... (1,092) (1,092) 75 (1,017) Extraordinary item..................... (38) (38) Discontinued operations................ 7 7 7 ------- ---- ------- ---- ----- Net (loss)............................. $ (1,085) $-- $(1,085) $ 37 $(1,048) ======= ==== ======= ==== ===== YEAR ENDED DECEMBER 31, 1996 Total revenues......................... $ 4,159 $ (164) $ 3,995 $(39) $ 3,956 Operating expenses excluding special charges.............................. 3,549 (164) 3,385 (17) 3,368 Special charges........................ 381 381 (16) 365 ------- ---- ------- ---- ----- Operating income (loss)................ 229 -- 229 (6) 223 Interest expense....................... (114) (114) 1 (113) Other income........................... 20 7 27 17 44 Income tax (expense) recovery from continuing operations................ (11) 705 694 694 ------- ---- ------- ---- ----- Income from continuing operations...... 124 712 836 12 848 Extraordinary item..................... (16) (16) Discontinued operations................ 18 (4) 14 14 ------- ---- ------- ---- ----- Net income............................. $ 142 $ 708 $ 850 $ (4) $ 846 ======= ==== ======= ==== ===== YEAR ENDED DECEMBER 31, 1997 Total revenues......................... $ 4,352 $-- $ 4,352 $(30) $-- $ 4,322 Total operating expenses............... 3,545 3,545 (11) (139) 3,395 ------- ---- ------- ---- ----- ----- Operating income (loss)................ 807 807 (19) 139 927 Interest expense....................... (118) (118) 1 (117) Other income........................... 57 57 (33) 24 Income tax (expense) recovery from continuing operations................ (325) (325) 22 (62) (365) ------- ---- ------- ---- ----- ----- Income from continuing operations...... 421 421 (29) 77 469 Discontinued operations................ (18) (18) (18) Cumulative effect of accounting change............................... 589 589 ------- ---- ------- ---- ----- ----- Net income............................. $ 403 $-- $ 403 $(29) $ 666 $ 1,040 ======= ==== ======= ==== ===== =====
A-1 52 CANADIAN/U.S. GAAP FINANCIAL INFORMATION CANADIAN NATIONAL RAILWAY COMPANY BALANCE SHEET DATA
U.S. GAAP CDN./U.S. GAAP --------- CDN GAAP ADJUSTMENTS -------------------------------------- -------------------------- RECLASS. AND AS ACCOUNTING AS (NOTE 2) REPORTED CHANGE RESTATED OTHER CAPITALIZATION -------- -------------- -------- -------- -------------- (NOTE 1) IN MILLIONS OF $CDN. AS AT DECEMBER 31, 1995 ASSETS Current and other assets.............. $1,524 $ (126) $1,398 $ (106) $-- $ 1,292 Net properties including land......... 4,650 4,650 (39) 4,611 ------- ---- ----- ---- ----- ----- Total Assets.......................... $6,174 $ (126) $6,048 $ (145) $-- $ 5,903 ======= ==== ===== ==== ===== ===== LIABILITIES AND SHAREHOLDERS' EQUITY Current and other liabilities......... $2,555 $ (126) $2,429 $ (53) $-- $ 2,376 Long-term debt........................ 1,313 1,313 (29) 1,284 Shareholders' equity.................. 2,306 2,306 (63) 2,243 ------- ---- ----- ---- ----- ----- Total liabilities and shareholders' equity.............................. $6,174 $ (126) $6,048 $ (145) $-- $ 5,903 ======= ==== ===== ==== ===== ===== AS AT DECEMBER 31, 1996 ASSETS Current and other assets.............. $1,367 $ 604 $1,971 $ (40) $-- $ 1,931 Net properties including land......... 4,869 4,869 (39) 4,830 ------- ---- ----- ---- ----- ----- Total Assets.......................... $6,236 $ 604 $6,840 $ (79) $-- $ 6,761 ======= ==== ===== ==== ===== ===== LIABILITIES AND SHAREHOLDERS' EQUITY Current and other liabilities......... $2,357 $ (104) $2,253 $ 7 $-- $ 2,260 Long-term debt........................ 1,499 1,499 (30) 1,469 Shareholders' equity.................. 2,380 708 3,088 (56) 3,032 ------- ---- ----- ---- ----- ----- Total liabilities and shareholders' equity.............................. $6,236 $ 604 $6,840 $ (79) $-- $ 6,761 ======= ==== ===== ==== ===== ===== AS AT DECEMBER 31, 1997 ASSETS Current and other assets.............. $1,953 $-- $1,953 $ (93) $ (164) $ 1,696 Net properties including land......... 5,122 5,122 (18) 1,199 6,303 ------- ---- ----- ---- ----- ----- Total Assets.......................... $7,075 $-- $7,075 $ (111) $1,035 $ 7,999 ======= ==== ===== ==== ===== ===== LIABILITIES AND SHAREHOLDERS' EQUITY Current and other liabilities......... $2,018 $-- $2,018 $ (4) $-- $ 2,014 Long-term debt........................ 1,640 1,640 (12) 1,628 Deferred income taxes................. (22) 369 347 Shareholders' equity.................. 3,417 3,417 (73) 666 4,010 ------- ---- ----- ---- ----- ----- Total liabilities and shareholders' equity.............................. $7,075 $-- $7,075 $ (111) $1,035 $ 7,999 ======= ==== ===== ==== ===== =====
A-2 53 CANADIAN/U.S. GAAP FINANCIAL INFORMATION CANADIAN NATIONAL RAILWAY COMPANY NOTES TO STATEMENT OF INCOME AND BALANCE SHEET DATA 1. RECLASSIFICATIONS AND ACCOUNTING CHANGE In the fourth quarter of 1997, CN adopted the new recommendations of the Canadian Institute of Chartered Accountants (CICA) for the accounting for income taxes. The new recommendations require the use of the asset and liability method to account for income taxes. Canadian GAAP requires the retroactive application of the adoption of new accounting principles; therefore, the 1996 financial statements reflect the recognition of previously unrecognized tax benefits. This change had the effect of increasing 1996 net income and current and other assets by Cdn$708 million. Prior to 1996, CN did not believe that it was more likely than not that the then existing tax benefits would be realized and thus no tax benefits were recognized in the 1995 financial statements. The new method of accounting for income taxes is similar, in all material respects, to the method required by U.S. GAAP under Statement of Financial Accounting Standards 109. In addition, certain figures previously reported for 1995 and 1996 have been reclassified to conform with the basis of presentation adopted in 1997. 2. CANADIAN/US GAAP ADJUSTMENTS (a) Canadian GAAP differs from US GAAP principally in the treatment of track replacement costs, foreign exchange, pension costs, loss or extinguishment of long-term debt, stock-based compensation, joint ventures and reorganization of shareholders' equity. The Canadian/US GAAP adjustments (excluding capitalization of track replacement costs) reflect the effect of the respective years' results and the cumulative effect of such adjustments to CN's financial position. (b) In the fourth quarter of 1997, CN changed its accounting policy for track replacement costs for US GAAP. The cumulative effect of this accounting change for prior years amounts to Cdn$589 million and is comprised of capitalization of track replacement costs, write down for impairment of properties, accumulated depreciation and income tax effect. A-3 54 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK (For Information (212) 701-7694) BY MAIL: BY HAND/OVERNIGHT DELIVERY: Wall Street Station Receive Window P.O. Box 1023 Wall Street Plaza New York, NY 10268-1023 88 Pine Street, 19th Floor New York, NY 10005
BY FACSIMILE: (212) 701-7636 (212) 701-7637 Confirm by Telephone: (212) 701-7694 Questions or requests for assistance or additional copies of this Offer to Purchase and the related Letter of Transmittal may be directed to the Information Agent or the Dealer Managers at their respective addresses and telephone numbers set forth below. Stockholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: LOGO MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) CALL TOLL FREE (800) 322-2885 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (212) 902-1000 (Call Collect) (800) 323-5678 (Toll Free) SCHRODER & CO. INC. The Equitable Center 787 Seventh Avenue New York, New York 10019-6016 (212) 492-6000 (Call Collect) EX-99.A.2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 13, 1998 OF BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK By Mail: Wall Street Station P.O. Box 1023 New York, New York 10268-1023 By Hand/Overnight Delivery: Receive Window Wall Street Plaza 88 Pine Street, 19th Floor New York, New York 10005 By Facsimile: (212) 701-7636 (212) 701-7637 Confirm by Telephone: (212) 701-7694 ------------------------ DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates for Shares (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Stockholders whose certificates evidencing Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined under "The Tender Offer--Terms of the Offer; Proration; Expiration Date" in the Offer to Purchase) or who cannot complete the procedure for delivery by book entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. See Instruction 2. --------------------- 2 DESCRIPTION OF SHARES TENDERED
======================================================================================================= NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY) ----------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- TOTAL SHARES - ------------------------------------------------------------------------------------------------------- * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. ----------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution Check box of applicable Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account No. at Transaction Code No. [ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) Date of Execution of Notice of Guaranteed Delivery Name of Institution which Guaranteed Delivery If delivery is by book-entry transfer, check box of applicable Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account No. at Transaction Code No. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 3 Ladies and Gentlemen: The undersigned hereby tenders to Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company ("Parent"), a Canadian corporation, the above-described shares of Common Stock, par value $0.001 (the shares subject to the Offer, as well as all other shares of such Common Stock hereinafter referred to as the "Shares"), of Illinois Central Corporation, a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated February 13, 1998 (the "Offer to Purchase") and this Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged. Purchaser reserves the right to transfer or assign, in whole at any time or in part from time to time, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Upon the terms of the Offer, subject to, and effective upon, acceptance for payment of, and payment for, Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect of such Shares on or after February 13, 1998 (collectively, "Distributions") and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer Shares tendered hereby and all Distributions, that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned will, upon request, execute any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of Shares tendered hereby, or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Michael J. Sabia and Jean Pierre Ouellet, and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, 4 deem proper and otherwise act (by written consent or otherwise) with respect to all Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with other terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Shares, including, without limitation, voting at any meeting of the Company's stockholders then scheduled. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in the Offer to Purchase under "The Tender Offer--Procedure for Tendering Shares" and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered". In the event that the box(es) entitled "Special Payment Instructions" and/or "Special Delivery Instructions" are completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and/or mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any Shares tendered hereby. 5 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased to be issued in the name of someone other than the undersigned, or if Shares tendered hereby and delivered by book-entry transfer are to be returned by credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Mail [ ] Check [ ] Share Certificate(s) to: Name (Please Print) Address - ------------------------------------------------------ Zip Code - ------------------------------------------------------ Taxpayer Identification or Social Security Number (See Substitute W-9 on reverse side) [ ] Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: Check appropriate box: [ ] DTC [ ] PDTC Account number: SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered". Mail [ ] Check [ ] Share Certificate(s) to: Name (Please Print) Address - ------------------------------------------------------ Zip Code - ------------------------------------------------------ Taxpayer Identification or Social Security Number (See Substitute W-9 on reverse side) 6 SIGN HERE (Please complete Substitute Form W-9 on reverse) - ------------------------------------------------------------ Signature(s) of Owner(s) Dated , 1998 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney- in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5). Name(s) (Please Print) Capacity (full title) Address (Include Zip Code) Area Code and Telephone Number (See Substitute W-9 on reverse side) GUARANTEE OF SIGNATURE(S) (IF REQUIRED; SEE INSTRUCTIONS 1 AND 5) Name of Firm Authorized Signature Dated , 1998. For use by financial institutions only. Financial institutions: place medallion guarantee in space below. 7 - ----------------------------------------------------------------------------------------------------------------------------------- PAYOR: HARRIS TRUST COMPANY OF NEW YORK - ----------------------------------------------------------------------------------------------------------------------------------- Part 1 -- TAXPAYER IDENTIFICATION NO. -- Social Security Number FOR ALL ACCOUNTS Enter your taxpayer identification number OR in the appropriate box. For most Employer Identification Number individuals and sole proprietors, this is (If awaiting TIN, write your social security number. For other "Applied For") entities, it is your Employer Identifica- SUBSTITUTE tion Number. If you do not have a number, FORM W-9 see How to Obtain a TIN in the enclosed Guidelines. Note: If the account is in more than one name, see the chart on page 2 of the enclosed Guidelinesto determine what number to enter. ----------------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYER'S REQUEST FOR Part II -- Exempt from Backup Withholding(SEE ENCLOSED Guidelines) TAXPAYER IDENTIFICATION NO. - ---------------------------------------------------------------------------------------------------------------------
Certification-Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number; (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and (3) Any other information provided on this form is true, correct and complete. You must cross item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return and you have not received a notice from the IRS advising you that backup withholding has terminated. - -------------------------------------------------------------------------------- SIGNATURE DATE 199 ___ - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. All signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Share Certificates. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, or an Agent's Message in the case of a book-entry transfer, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in "The Tender Offer--Terms of the Offer; Proration; Expiration Date" in the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Stockholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, or an Agent's Message in the case of a book-entry transfer, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, all as described under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a manually signed facsimile hereof), all 9 tendering stockholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any of the Shares tendered hereby are owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. 10 EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE SHARES TENDERED HEREBY. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. Stockholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. Questions and Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent, the Dealer Managers or from brokers, dealers, commercial banks or trust companies. 9. Substitute Form W-9. Each tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided above, and to certify, under penalty of perjury, that such number is correct and that such stockholder is not subject to backup withholding of federal income tax. If a tendering stockholder has been notified by the Internal Revenue Service that such stockholder is subject to backup withholding, such stockholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such stockholder has since been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such stockholder. If the tendering stockholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such stockholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). 11 IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such stockholder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below. If such stockholder is an individual, the TIN is such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service, and payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. If a stockholder makes a false statement that results in no imposition of backup withholding, and there is no reasonable basis for such statement, a $500 penalty may also be imposed by the Internal Revenue Service. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to such individual's exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. A stockholder should consult his or her advisor as to such stockholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service, provided that certain documentation requirements are satisfied. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such stockholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such stockholder that such stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the stockholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. Stockholders should contact the Information Agent, the Dealer Managers or their broker, dealer, commercial bank or trust company for assistance concerning the Offer. Additional copies of the Offer to Purchase, this Letter of Transmittal and other related materials may also be obtained from the Information Agent or the Dealer Managers. 12 The Information Agent for the Offer is: LOGO MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) CALL TOLL FREE (800) 322-2885 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (212) 902-1000 (Call Collect) (800) 323-5678 (Toll Free) SCHRODER & CO. INC. The Equitable Center 787 Seventh Avenue New York, New York 10019-6016 (212) 492-6000 (Call Collect) February 13, 1998 EX-99.A.3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 13, 1998 OF BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY (Not to be used for signature guarantees) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing shares of Common Stock, par value $0.001 per share, of Illinois Central Corporation, a Delaware corporation (the "Company"), are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to Harris Trust Company of New York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined under "The Tender Offer--Terms of the Offer; Proration; Expiration Date" in the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by facsimile transmission to the Depositary. See "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. The Depositary for the Offer is: HARRIS TRUST COMPANY OF NEW YORK By Mail: Wall Street Station P.O. Box 1023 New York, New York 10268-1023 By Hand/Overnight Delivery: Receive Window Wall Street Plaza 88 Pine Street, 19th Floor New York, New York 10005 By Facsimile: (212) 701-7636 (212) 701-7637 Confirm by Telephone: (212) 701-7694 ------------------------ DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company ("Parent"), a Canadian corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 13, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of such Common Stock hereinafter referred to as the "Shares"), of the Company, pursuant to the guaranteed delivery procedure set forth under "The Tender Offer--Procedure for Tendering Shares" of the Offer to Purchase. Certificate Nos. (if available): SIGN HERE - -------------------------------------------- -------------------------------------------- - -------------------------------------------- (Signature(s) of Holder(s)) Please check one box if Shares will be Dated: delivered by book-entry transfer: Name(s) of Holder(s): [ ] The Depository Trust Company -------------------------------------------- [ ] The Philadelphia Depository Company Please type or print -------------------------------------------- Account No. Address of Company -------------------------------------------- Zip Code -------------------------------------------- Area Code and Telephone Number
3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, guarantees (a) that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary the Shares tendered hereby, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, together with a properly completed and duly executed Letter(s) of Transmittal (or a manually signed facsimile(s) thereof) or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery and any other required documents, all within three New York Stock Exchange, Inc. trading days of the date hereof. A "trading day" is any day on which the New York Stock Exchange, Inc. is open for business. - --------------------------------------------------------- Name of Firm - --------------------------------------------------------- Address - --------------------------------------------------------- Zip Code - --------------------------------------------------------- Area Code and Telephone Number - --------------------------------------------------------- Authorized Signature - --------------------------------------------------------- Title Name: Please type or print Dated: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A.4 5 BROKER DEALER LETTER 1 GOLDMAN, SACHS & CO. SCHRODER & CO. INC. 85 Broad Street The Equitable Center New York, New York 10004 787 Seventh Avenue (212) 902-1000 (Call Collect) New York, New York 10019-6016 (800) 323-5678 (Toll Free) (212) 492-6000 (Call Collect)
OFFER TO PURCHASE FOR CASH 46,051,761 SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION AT $39.00 NET PER SHARE BY BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. February 13, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company ("Parent"), a Canadian corporation, to act as Dealer Managers in connection with Purchaser's offer to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of such Common Stock hereinafter called the "Shares"), of Illinois Central Corporation, a Delaware corporation (the "Company"), at $39.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated February 13, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) THE RECEIPT BY PARENT, PRIOR TO THE EXPIRATION DATE OF THE OFFER, OF A FAVORABLE INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE VOTING TRUST (AS DEFINED IN THE OFFER TO PURCHASE) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY BY PARENT. 2 Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated February 13, 1998; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents are not immediately available or cannot be delivered to Harris Trust Company of New York (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. A letter to stockholders of the Company from E. Hunter Harison, President of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company and mailed to stockholders of the Company, recommending that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares accepted for payment pursuant to the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment) will be made only after timely receipt by the Depositary of certificates evidencing such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or a manually signed facsimile thereof) properly completed and duly executed and any other required documents. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described under "The Tender Offer--Procedure for Tendering Shares" in the Offer to Purchase. None of Purchaser, Parent nor any officer, director, stockholder, agent or other representative of Purchaser or Parent will pay any fees or commissions to any broker, dealer or other person (other than to the Dealer Managers, the Depositary and the Information Agent as described in the Offer) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, Purchaser will, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 2 3 Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, MacKenzie Partners, Inc. (the "Information Agent") or the undersigned at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase and the related Letter of Transmittal. Very truly yours, GOLDMAN, SACHS & CO. SCHRODER & CO. INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AN AGENT OF PARENT, PURCHASER, THE COMPANY, ANY AFFILIATE OF THE COMPANY, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A.5 6 CLIENT LETTER 1 OFFER TO PURCHASE FOR CASH 46,051,761 SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION AT $39.00 NET PER SHARE BY BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. February 13, 1998 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated February 13, 1998 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company ("Parent"), a Canadian corporation, to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of such Common Stock hereinafter referred to as the "Shares") of Illinois Central Corporation, a Delaware corporation (the "Company"), at $39.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). We are the holder of record of Shares held by us for your account. A TENDER OF SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $39.00 per Share, net to you in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer is being made for an aggregate of 46,051,761 Shares. 3. The Board of Directors of the Company, by unanimous vote, has approved the Agreement and Plan of Merger dated as of February 10, 1998 among Parent, Purchaser and the Company (the "Merger Agreement") and the transactions contemplated thereby, including the Offer and the Merger, and has determined that the Offer and the Merger are fair to, and in the best interests of, the holders of Shares and recommends that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. 2 4. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. 5. The Offer is conditioned upon, among other things, (1) there being validly tendered in accordance with the terms of the Offer prior to the expiration date of the Offer and not withdrawn a number of Shares which, together with the Shares then owned by Parent, represents at least 50.1% of the outstanding Shares on a fully diluted basis (the "Minimum Condition") and (2) the receipt by Parent, prior to the expiration date of the Offer, of a favorable informal advisory opinion from the staff of the United States Surface Transportation Board to the effect that the proposed use of the Voting Trust (as defined in the Offer to Purchase) will preclude unlawful control of the Company by Parent. 6. You will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Goldman, Sachs & Co. and Schroder & Co. Inc, the Dealer Managers, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH 46,051,761 SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION BY BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated February 13, 1998, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Blackhawk Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company, a Canadian corporation, to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of Common Stock hereinafter referred to as the "Shares"), of Illinois Central Corporation, a Delaware corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Dated: , 1998 Number of Shares to be Tendered:* __________ Shares SIGN HERE - ------------------------------------------------------ Signature(s) - ------------------------------------------------------ - ------------------------------------------------------ Please type or print name(s): - ------------------------------------------------------ - ------------------------------------------------------ Please type or print address(es): - ------------------------------------------------------ - ------------------------------------------------------ Area Code and Telephone Number(s) - ------------------------------------------------------ Taxpayer Identification or Social Security Number(s) - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.6 7 W-9 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. ------------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SE- CURITY NUMBER OF -- - -------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if com- bined funds, any one of the individual(s)(1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, either per- son(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Account in the name of The ward, minor, or guardian or committee for incompetent person(3) a designated ward, minor, or incompetent person 6. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trus- tee) The actual owner(1) b. So-called trust account that is not a legal or valid trust under State law - -------------------------------------------------------- GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF -- - -------------------------------------------------------- 7. Sole proprietorship ac- The owner(4) count 8. A valid trust, estate, or The legal entity (Do pension trust not furnish the identi- fying number of the personal representa- tive or trustee unless the legal entity itself is not designated in the account title.)(5) 9. Corporate account The corporation 10. Religious, charitable, or The organization educational organization account or an association, club or other tax-exempt organization 11. Partnership account held The partnership in the name of the busi- ness 12. A broker or registered The broker or nominee nominee 13. Account with the Depart- The public entity ment of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
================================================================== (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. If the owner does not have an employer identification number, furnish the owner's Social Security number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number or Form W-7. Application for International Taxpayer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEE EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - - A corporation. - - A financial institution. - - An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2). - - The United States, or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or agency or instrumentality thereof. - - An international organization or any agency, or instrumentality thereof. - - A dealer in securities or commodities registered in the U.S., the District of Columbia or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - An exempt charitable remained trust, or a non-exempt trust described in section 4947(a) (1). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. Payment of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payment to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - - Payments described in section 6049(b)(5) to non-resident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments, other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include a portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be subject to a penalty of 20% on any portion of an under-payment attributable to that failure unless it is shown that you acted with reasonable cause and in good faith. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.7 8 SUMMARY ADVERTISEMENT 1 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated February 13, 1998, and the related Letter of Transmittal, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In those jurisdictions whose laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser, if at all, only by Goldman, Sachs & Co. and Schroder & Co. Inc. as dealer managers or one or more registered brokers or dealers licensed under the laws of, and representing the stockholders residing in, such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH 46,051,761 SHARES OF COMMON STOCK OF ILLINOIS CENTRAL CORPORATION AT $39.00 NET PER SHARE BY BLACKHAWK MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF CANADIAN NATIONAL RAILWAY COMPANY Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary of Canadian National Railway Company ("Parent"), a Canadian corporation, is offering to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the Offer, as well as all other shares of Common Stock hereinafter referred to as the "Shares"), of Illinois Central Corporation (the "Company"), a Delaware corporation, at $39.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 13, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED. Upon the terms and subject to the conditions of the Offer, if more than 46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase), Purchaser will accept for payment and pay for only 46,051,761 Shares on a pro rata basis (with appropriate adjustments to avoid purchase of fractional Shares) based on the number of Shares properly tendered by each stockholder prior to or at the Expiration Date and not withdrawn. In the event that proration of tendered Shares is required, because of the difficulty of determining the precise number of Shares properly tendered and not withdrawn (due in part to the 2 guaranteed delivery procedures described in Section 3 of the Offer to Purchase), the Purchaser does not expect that it will be able to announce the final results of such proration or pay for any Shares until at least seven New York Stock Exchange, Inc. trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Stockholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their broker. The purpose of the Offer is for Parent, through Purchaser, to acquire a majority equity interest in the Company as the first step in a business combination of Parent and the Company. The Offer is being made pursuant to the terms of the Agreement and Plan of Merger dated as of February 10, 1998 (the "Merger Agreement"), which provides that, among other things, following completion of the Offer and the satisfaction or waiver of certain conditions and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware, Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation and will become an indirect wholly owned subsidiary of Parent. As more fully described in Section 13 of the Offer to Purchase, at the effective time of the Merger (the "Effective Time"), (i) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of 46,051,761 Shares, each Share outstanding immediately prior to the Effective Time (other than those Shares held by the Company as treasury stock or owned by Parent or any subsidiary of Parent) shall be converted into the right to receive the number of duly authorized, validly issued, fully paid and nonassessable shares, without par value, of Parent ("Parent Common Stock") equal to the fraction obtained by dividing $39.00 by the Parent Average Closing Price (as defined in Section 13 of the Offer to Purchase); and (ii) if Purchaser shall have purchased an aggregate of less than 46,051,761 Shares pursuant to the Offer, each Share outstanding immediately prior to the Effective Time (other than those Shares held by the Company as treasury stock or owned by Parent or any subsidiary of Parent) shall be converted into the right to receive: (a) a number of shares of Parent Common Stock equal to the fraction obtained by dividing $39.00 by the Parent Average Closing Price, multiplied by the Stock Proration Factor (as defined in Section 13 of the Offer to Purchase); and (b) cash in an amount equal to the product of 1 minus the Stock Proration Factor, multiplied by $39.00. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) THE RECEIPT BY PARENT, PRIOR TO THE EXPIRATION OF THE OFFER, OF A FAVORABLE INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION BOARD TO THE EFFECT THAT THE PROPOSED USE OF A VOTING TRUST (AS DEFINED IN THE OFFER TO PURCHASE) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY BY PARENT. The Offer is subject to certain other conditions which are described in Section 16 of the Offer to Purchase. Subject to the terms of the Merger Agreement, Purchaser reserves the right to waive any or all of the conditions to the Offer and to extend the Offer if any of the conditions to the Offer are not satisfied. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Simultaneously with the purchase of Shares pursuant to the Offer, the Shares purchased will be deposited in the Voting Trust in accordance with the terms and conditions of a proposed voting trust agreement. If the Minimum Condition has not been satisfied prior to the scheduled expiration of the Offer (as such Offer may have been extended), Purchaser shall have the right at its option to extend the Offer for a period of up to twenty business days. If, at the scheduled expiration of the Offer (as such date may have been extended by Purchaser as contemplated by the preceding sentence), the 3 Minimum Condition has not been satisfied, then (unless the parties otherwise agree) at Parent's election either (i) Purchaser shall amend the terms of the Offer by increasing the number of shares sought in the Offer to all of the outstanding Shares, subject to certain conditions described in Section 13 of the Offer to Purchase, in which event the Merger Agreement shall be modified as provided in the Merger Agreement, or (ii) Purchaser shall terminate the Offer and Purchaser and the Company shall proceed with the Merger in accordance with the Merger Agreement in which event the terms and conditions of the Merger Agreement shall be modified as provided in the Merger Agreement. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to Harris Trust Company of New York (the "Depositary") of Purchaser's acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from Purchaser and transmitting payments to such tendering stockholders. Under no circumstances will interest be paid on the consideration paid for Shares pursuant to the Offer, regardless of any delay in making such payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (A) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility (as defined in the Offer to Purchase), (B) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) and (C) any other documents required under the Letter of Transmittal. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after April 13, 1998. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in Section 4 of the Offer to Purchase. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, 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. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 of the Offer to Purchase. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination shall be final and binding. 4 The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to brokers, dealers, commercial banks, trust companies, and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Requests for assistance or copies of the Offer to Purchase and the related Letter of Transmittal may be directed to the Dealer Managers or the Information Agent as set forth below, and copies will be furnished promptly at Parent's expense. The Information Agent for the Offer is: MacKenzie Partners, Inc 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or Call Toll Free (800) 322-2885 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (212) 902-1000 (Call Collect) (800) 323-5678 (Toll Free) SCHRODER & CO. INC. The Equitable Center 787 Seventh Avenue New York, New York 10019-6016 (212) 492-6000 (Call Collect) February 13, 1998 EX-99.A.8 9 TEXT OF PRESS RELEASE 1 FOR IMMEDIATE RELEASE CANADIAN NATIONAL TO ACQUIRE ILLINOIS CENTRAL IN STRATEGIC COMBINATION VALUED AT US$3 BILLION(1) CN Forges Integrated North American Rail Network MONTREAL AND CHICAGO - February 10, 1998 - Canadian National Railway Company ("CN") (NYSE: CNI, TSE/ME: CNR) and Illinois Central Corporation ("IC") (NYSE: IC) announced today that the companies have entered into a definitive merger agreement under which CN will acquire all of the common stock of IC for a combination of cash and stock valued at US$39.00 per IC share. IC has approximately 61.4 million shares outstanding, giving the transaction a total equity value of approximately US$2.4 billion. Upon completion of the merger, CN will also assume IC's net debt of approximately US$560 million. Under the terms of the agreement, which has been unanimously approved by both companies' Boards of Directors, CN will promptly commence a cash tender offer for approximately 46.1 million shares of IC common stock, representing approximately 75 percent of the outstanding IC common stock at a price of US$39.00 per IC share. This represents a premium of 17.8 percent over the US$33.12 average closing price of IC stock for the 30-calendar day period ended February 9, 1998. The tender offer is subject to a minimum tender condition of 50.1 percent of the fully diluted IC common shares being validly tendered and not withdrawn. The tender offer will be subject to receipt of informal STB staff approval of a required voting trust agreement and the satisfaction of other customary conditions. The shares purchased in the tender offer will be placed in the voting trust. Following completion of the tender offer, CN will consummate a second-step merger in which the remaining IC shares will be exchanged for cash and CN shares at a value equal to the same cash price paid in the tender offer, subject to certain collar arrangements. The CN shares will be issued in the merger with respect to 25 percent of the IC common stock. The merger is subject to, among other things, approval by IC shareholders and other customary conditions. After the merger, all of IC's stock will be held in the voting trust. Neither the acquisition of the IC shares pursuant to the tender offer nor the merger will be subject to STB approval of the combination. The transaction will be accounted for as a purchase and will be taxable to IC shareholders. Final regulatory approval is expected in early 1999. (1) Redacted. 1 2 David McLean will remain Chairman of the Board of Canadian National and Paul M. Tellier will remain President and Chief Executive Officer of CN. E. Hunter Harrison, President and Chief Executive Officer of Illinois Central, will become Chief Operating Officer of CN effective upon completion of the tender offer. Two IC directors, Gilbert H. Lamphere, Chairman of the Board of Illinois Central, and Alexander P. Lynch, will join the CN Board of Directors, which will expand to 15 members. Messrs. Harrison, Lamphere and Lynch have each agreed to make a significant equity investment in CN. Furthermore, it is anticipated that the IC employee stock options outstanding at the time of the merger will be converted into an equal value of CN employee stock options. Canadian National, Canada's largest and only transcontinental railway, has made significant strides since it was privatized in 1995 and posted record earnings in 1996 and 1997. CN's reported revenue rose 15 percent between 1992 and 1997. Revenue in 1997 was CDN$4.4 billion (US$3.0 billion). CN's operating ratio improved by approximately 16 points over this period to 78.6 percent (U.S. GAAP) in 1997. CN reaches the key U.S. cities of Detroit and Chicago. Illinois Central, with 1997 revenues of approximately $700 million, has operations extending from the rail hub of Chicago, south to the Gulf of Mexico, and west through Iowa. Based upon its 62.3 percent operating ratio, IC is the most efficient U.S. Class I railroad. Operating ratio (operating expenses as a percentage of revenues) is the freight railroad industry's standard efficiency measure. With headquarters in Montreal, Canadian National after the merger will be the fifth largest railway in North America based on 1997 annual revenues of CDN$5.3 billion (US$3.7 billion). CN will have approximately 18,700 route miles in Canada and the U.S. and 24,600 employees. 2 3 The combined strengths of CN and IC include: - -- A seamless North-South network from all major markets in Canada through Chicago and Detroit to the Gulf of Mexico, positioning CN along a rapidly growing trade corridor which had 1997 annual rail revenues of over $5 billion; - -- The ability to capitalize on the liberalization of trade among Canada, the United States and Mexico, which is growing annually at double-digit rates; - -- A broader array of rail service options in key North-South traffic lanes; - -- Expedited, more reliable and more efficient single line service that will free up assets, increase rail car availability and reduce switching between the two railways; - -- Enhanced competition at all points served by the combined rail network including new port options for shippers; - -- Improved opportunities for diverting traffic from highways between Southwest Ontario, the Midwest and beyond by improving CN's intermodal network; - -- Reduced reliance on truck-laden interstate highways; and - -- Integration of the best safety practices of both companies throughout the Canadian and U.S. transportation systems. "Employees will benefit from being part of a stronger company in a consolidating industry. We are delighted to welcome IC's talented employees into the CN family. We look forward to having Hunter Harrison join CN as soon as possible," concluded Mr. Tellier. It is anticipated that the combined company's operating efficiency will improve as a result of: - -- Precision train schedules which will increase yard and line capacity; - -- Lower car cycle times, which will reduce rolling stock requirements and increase car availability; and - -- Savings from improved asset utilization. 3 4 Mr. Harrison added, "Our management teams share a similar philosophy for growth, customer service and the bottom line. In fact, over the last several years, CN and IC have already worked successfully together to improve service. This head-start will enable the combined company to quickly realize additional service improvements. "The management of the combined railroad is committed to keeping in place significant levels of employee share ownership and incentive plans based on industry-leading service and efficiency. We believe this will help keep the focus on exceptional performance long after the immediate benefits of combining have been achieved," added Mr. Harrison. Mr. Tellier concluded, "We are delivering on CN's promised turnaround strategy and focusing on our customers, shareholders and employees. CN is now positioned to thrive in the North American railroad industry of the 21 st century." The number of shares to be received per IC share in the second step merger will be equal to $39.00 divided by the average closing price of the CN common stock on the NYSE for a 20-day trading period ending two business days prior to the effective date of the merger, provided that, for purposes of the calculation, such average price will not be greater than $64.50 or less than $43.00 (the collar). Goldman, Sachs & Co. and Schroders plc acted as financial advisors to CN. The Beacon Group acted as financial advisor to IC and Lehman Brothers Inc. provided a fairness opinion to IC. Goldman Sachs Credit Partners L.P. and Bank of Montreal have fully underwritten and will act as Arrangers of US$1.8 billion of senior credit facilities to support the transaction. Davis Polk & Wardwell acted as legal advisor to CN and Harkins Cunningham provided regulatory counsel to CN. Simpson Thacher & Bartlett acted as legal advisor to IC and Oppenheimer Wolff & Donnelly provided regulatory counsel to IC. Illinois Central Corporation is a holding company whose principal subsidiaries are the Illinois Central (ICRR), which operates a 2,600-mile freight railroad from Chicago south to the Gulf of Mexico, and the Chicago Central (CCP), which operates an 850-mile system from Chicago west through Iowa. IC was incorporated in 1851 and its efficient North-South configuration is known as the "Main Line of Mid-America." Canadian National is Canada's largest and North America's sixth largest freight railroad. CN's network serves all of Canada, including the key ports of Vancouver, Montreal, and Halifax, as well as Chicago and Detroit, with connections to all points in North America. In 1992, the Company launched a revitalization plan, investing in the industry's most advanced management information system and opening the St. Clair Tunnel, which established the fastest route between Eastern Canada and the U.S. heartland. Since privatization in 1995, CN has delivered steadily improving financial performance and customer service since its initial public offering. For background information and maps concerning this transaction, additional information about CN and web links to the IC, visit the World Wide Web at www.cn.ca. 4 5 This press release contains forward-looking statements regarding future events and the future performance of CN that involve risks and uncertainties that could cause actual results to differ materially. Those risks and uncertainties include, but are not limited to, customer demand, industry competition and regulatory developments, natural events such as severe weather, floods and earthquakes, the effects of adverse economic conditions affecting the Company's shippers, changes in fuel prices, and the ultimate outcome of shipper claims, environmental investigations or proceedings and other types of claims and litigations. We refer you to the documents that CN files from time to time with the Securities and Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K reports, which contain additional important factors that could cause its results to differ from its current expectations and the forward-looking statements contained in this press release. # # # For Canadian National: For Illinois Central: Investors Media Ann Thoma Robert Noorigian Mark Hallman (312) 755-7591 (514) 399-0052 (514) 399-6630 After 2/11: (416) 217-6390 Joele Frank / Judy Wilkinson George Sard / Judy Brennan Abernathy MacGregor Frank Sard Verbinnen & Co. (212) 371-5999 (212) 687-8080 5 EX-99.A.9 10 TEXT OF PRESS RELEASE 1 CANADIAN NATIONAL COMMENCES US$39 PER SHARE TENDER OFFER FOR 75% OF ILLINOIS CENTRAL SHARES MONTREAL-February 13, 1998 - Canadian National Railway Company ("CN") (NYSE: CNI, TSE/ME: CNR) announced today that it has commenced a cash tender offer for 46,051,761 shares of Illinois Central Corporation ("IC") (NYSE: IC) common stock, representing approximately 75 percent of the outstanding IC common stock, at a price of US$39.00 per IC share. The tender offer is scheduled to expire at midnight, New York City time, on Friday, March 13, 1998, unless extended. The tender offer is subject to a minimum tender condition of 50.1 percent of the fully diluted IC common shares being validly tendered and not withdrawn. The tender offer will be subject to receipt of informal United States Surface Transportation Board (STB) staff approval of a required voting trust agreement and the satisfaction of other customary conditions. The shares purchased in the tender offer will be placed in the voting trust. The acquisition of the IC shares pursuant to the tender offer will not be subject to STB approval of the combination. The complete terms and conditions of the tender offer are set forth in the offering documents being filed today with the United States Securities and Exchange Commission. Following completion of the tender offer, CN will consummate a second-step merger in which the remaining IC shares will be exchanged for cash and CN shares with a value equal to the same cash price paid in the tender offer, subject to certain collar arrangements. The CN shares will be issued in the merger with respect to 25 percent of the IC common stock. As previously announced, CN and IC have entered into a definitive merger agreement under which CN will acquire all of the common stock of IC for a combination of cash and stock valued at US$39.00 per IC share. IC has approximately 61.4 million shares outstanding, giving the transaction a total equity value of approximately US$2.4 billion. Goldman, Sachs & Co. and Schroder and Co. Inc. are acting as Dealer Managers for the offer and MacKenzie Partners, Inc. is acting as Information Agent. # # # Investors Media Abernathy MacGregor Frank Robert Noorigian Mark Hallman Joel Frank / Judy Wilkinson (514) 399-0052 (416) 217-6390 (212) 371-5999 EX-99.B.1 11 COMMITMENT LETTER 1 EXECUTION GOLDMAN SACHS CANADA GOLDMAN SACHS BANK OF MONTREAL CREDIT PARTNERS CO. CREDIT PARTNERS L.P. 129, RUE ST-JACQUES SUITE 1201 85 BROAD STREET 12TH FLOOR 150 KING STREET W. NEW YORK, NEW YORK MONTREAL, QUEBEC TORONTO, ONTARIO 10004 H2Y 1L6 CANADA M5H IJ9 PERSONAL & CONFIDENTIAL February 9, 1998 Canadian National Railway Company 935 de La Gauchetiere West, 3rd Floor Montreal, Quebec H3B 2M9 Attention: Michael J. Sabia Executive Vice President and Chief Financial Officer Re: $1.8 Billion Senior Credit Facilities Ladies and Gentlemen: You have advised us that Canadian National Railway Company (the ``Company'') intends to acquire (the ``Acquisition'') the outstanding capital stock of Illinois Central Corporation, a Delaware corporation (``Target''), through a tender offer (the ``Tender Offer'') by Company Merger Sub, Inc., a newly formed, wholly-owned Subsidiary (``Merger Sub'') of the Company, for up to 75% of the shares of Target (the ``Shares''), followed by a merger of Merger Sub with and into Target (the ``Merger'') in which Target will be the surviving corporation and in which any Shares not purchased in the Tender Offer will be cancelled in exchange for cash and/or stock consideration. We understand that the Tender Offer will be conditioned on, among other things, the tender and purchase of at least 50.1% of the Shares (the ``Minimum Shares'') on a fully diluted basis and that a merger agreement (the ``Merger Agreement'') will be entered into between the Company and Target providing for the Merger. Upon the consummation of the Merger, Target will be a wholly-owned subsidiary of the Company (subject to a voting trust arrangement established to comply with applicable law). You have also advised us that you propose to finance the cash consideration to be paid in connection with the Acquisition and related fees and expenses, to refinance certain existing indebtedness and to finance the Company's ongoing working capital and general corporate requirements with senior credit facilities of up to US$1.8 billion (the ``Senior Facilities''), together with other available cash at the Company. NY1-568162 EXECUTION 2 Canadian National Railway Company February 9, 1998 Page 2 Subject to the terms and conditions contained in this letter and the attached Annex A and Annex B (collectively, the ``Commitment Letter''), Goldman Sachs Canada Credit Partners Co. (``GSCCP'') and Goldman Sachs Credit Partners L.P. (``GSCP'') are pleased to confirm their commitment to provide 50% of the entire $1.8 billion of Senior Facilities, and Bank of Montreal (``BMO''; together with GSCP and GSCCP, the ``Lead Lenders'') is pleased to confirm its commitment to provide 50% of the entire $1.8 billion of Senior Facilities. GSCP is pleased to confirm its commitment to act as Advisor and Syndication Agent and as an Arranger in connection with the Senior Facilities. BMO is pleased to confirm its commitment to act as Administrative Agent and as an Arranger in connection with the Senior Facilities. Co-Documentation Agents will be determined by the Company in consultation with the Lead Lenders. Our agreement with respect to certain fees payable to the Lead Lenders and certain other matters is set forth in a separate letter (the ``Fee Letter'') of even date herewith. Each Lead Lender's commitment is subject, in its discretion, to the following conditions: (i) there shall not have been, since September 30, 1997, any material adverse change in or effect on, either individually or in the aggregate, the condition, operations, properties, business or results of operations of the Company and its subsidiaries, taken as a whole, which adversely affects or could reasonably be expected to adversely affect the ability of the Company and its subsidiaries, taken as a whole, to perform any of their obligations under the Senior Facilities, and (ii) there shall not have been, since September 30, 1997, any material adverse change in or effect on, either individually or in the aggregate, the condition, operations, properties, business or results of operations of Target and its subsidiaries, taken as a whole, which adversely affects or could reasonably be expected to adversely affect the ability of Target and its subsidiaries, taken as a whole, to perform any of their obligations under the Senior Facilities. Each Lead Lender's commitment is also subject, in its discretion, to the satisfactory negotiation, execution and delivery of appropriate loan documents relating to the Senior Facilities, including, without limitation, a credit agreement, guaranties, opinions of counsel and other related definitive documents (collectively, the ``Loan Documents'') to be based upon and substantially consistent with the terms set forth in this Commitment Letter. In the event that information, conditions or events come to our attention after the date hereof that (i) relate to the Company or Target or their respective subsidiaries, (ii) are inconsistent with the written information previously disclosed by you to the Lead Lenders in connection with the Senior Facilities and (iii) would reasonably be expected to result in a material adverse change in or effect on, either individually or in the aggregate, the condition, operations, properties, business or results of operations of the Company, Target and their respective subsidiaries, taken as a whole, which change or effect adversely affects or could reasonably be expected to adversely affect the ability of the Company, Target and their respective subsidiaries, taken as a whole, to perform any of their obligations under the Senior Facilities, or in the event any of the conditions set forth in the Loan Documents are not satisfied, we may, in our sole discretion, suggest alternative financing amounts or structures that ensure adequate protection for the Lead Lenders and the Lenders (as defined in the attached Annex B) or decline to participate in the proposed financing. NY1-568162 EXECUTION 3 Canadian National Railway Company February 9, 1998 Page 3 The terms of this Commitment Letter are intended as an outline of certain of the material terms of the Senior Facilities, but do not include all of the terms, conditions, covenants, representations, warranties, default clauses and other provisions that will be contained in the Loan Documents. The Loan Documents shall include, in addition, provisions that are customary or typical for financings of this type and other provisions that the Lead Lenders may reasonably determine to be appropriate in the context of the proposed transactions. The Lead Lenders intend and reserve the right to syndicate the Senior Facilities to the Lenders. The Lead Lenders will select the Lenders in consultation with the Company. The Lead Lenders will lead the syndication of the Senior Facilities, including determining the timing of all offers to potential Lenders, the acceptance of commitments, the amounts offered, allocations of final commitments, any titles of agent or similar designations awarded to Lenders (other than the titles of Documentation Agent and Co-Documentation Agent, which will be determined by the Company in consultation with the Lead Lenders) and the compensation provided to each Lender from the amounts to be paid to the Lead Lenders pursuant to the terms of this Commitment Letter and the Fee Letter. You agree to cooperate and to use commercially reasonable efforts to cause Target to cooperate with the Lead Lenders in connection with (i) the preparation of an information package regarding the business and operations and prospects of each of the Company and Target and their respective subsidiaries, such cooperation to include, without limitation, the delivery of all information prepared by or on behalf of the Company, Target and their respective subsidiaries and relating to the transactions contemplated hereunder that is deemed reasonably necessary by the Lead Lenders to complete the syndication of the Senior Facilities, (ii) the presentation of such information package in meetings and other communications with prospective Lenders in connection with the syndication of the Senior Facilities and (iii) facilitating assignments of the Senior Facilities to additional Lenders. You acknowledge that the Lead Lenders will be using and relying upon the information contained in such information package and presentation without independent verification thereof. In addition, you represent and covenant that, to your best knowledge (i) all information, other than the Projections (as defined below) provided by you to the Lenders in connection with the transactions contemplated hereunder, taken as a whole, is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading as of the date provided by you and (ii) all financial projections concerning the Company or the Target provided by you to the Lenders in connection with the transaction contemplated hereunder (the ``Projections'') have been or will be prepared in good faith based upon reasonable assumptions. NY1-568162 EXECUTION 4 Canadian National Railway Company February 9, 1998 Page 4 You agree to the provisions with respect to our indemnity and other matters set forth in Annex A. You also agree to reimburse us periodically for our reasonable out-of-pocket expenses, including reasonable and customary syndication costs and expenses and the reasonable fees and disbursements of our attorneys and any other consultants or advisors that we retain, plus any sales, use or similar taxes (including additions to such taxes, if any) arising in connection with any matter referred to in this Commitment Letter or the Fee Letter (in each case, whether incurred before or after the date hereof and whether or not the Senior Facilities are funded or the Acquisition is consummated). Please note that this Commitment Letter, the Fee Letter and any written or oral advice provided by any of the Lead Lenders in connection with this arrangement is exclusively for the information of the Company and its attorneys and advisors and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent, except that (x) the Commitment Letter and the Fee Letter, any of the terms thereof and any such advice may be disclosed as, and solely to the extent, required by law, (y) the Commitment Letter and, in the case of clause (2) of this clause (x), the Fee Letter may be disclosed (1) to Target and its advisors in connection with the Acquisition so long as Target and its advisors agree to keep the Commitment Letter and the terms thereof confidential and (2) to your advisors and (z) after your acceptance of this letter and the execution by the Company and Target of the Merger Agreement, you or the Target may make public disclosure of the existence, amount and other material terms (excluding, except to the extent required by law, the terms of any fees and other matters set forth in the Fee Letter) and conditions of our commitment hereunder. As you know, each of the Lead Lenders and their respective affiliates may from time to time effect transactions, for their respective accounts or the accounts of customers, and hold positions in loans or options on loans of the Company, Target and other companies that may be the subject of this arrangement. In addition, Goldman, Sachs & Co. is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company, Target and other companies that may be the subject of this arrangement. In addition, the Lead Lenders may employ the services of their respective affiliates in providing certain services hereunder (including assigning certain of such Lead Lender's obligations hereunder to its affiliates) and may exchange with such affiliates information concerning the Company, Target and other companies that may be the subject of this arrangement, and such affiliates shall be entitled to the benefits afforded to the Lead Lenders hereunder. With respect to the transactions contemplated hereby, each of GSCP and its affiliates and BMO acknowledges that it has separately entered into confidentiality agreements with you and agree to be bound by the respective terms of such agreements. Each Lead Lender's commitment hereunder shall terminate (i) on February 13, 1998, unless the Merger Agreement shall have been entered into on or prior to such date, or (ii) on March 31, 1998, unless the closing of the Senior Facilities, on the terms and subject to the conditions contained herein, shall have been consummated on or prior to such date. [Balance of page intentionally left blank] NY1-568162 EXECUTION 5 Canadian National Railway Company February 9, 1998 Page 5 Please confirm that the foregoing is in accordance with your understanding by signing and returning to GSCP, on behalf of the Lead Lenders, a copy of this Commitment Letter and the Fee Letter, on or before the close of business on February 9, 1998, whereupon this Commitment Letter and the Fee Letter shall become binding agreements among us. If not signed and returned as described in the preceding sentence by such date, this offer will terminate on such date. We look forward to working with you on this assignment. Very truly yours, GOLDMAN SACHS CANADA CREDIT PARTNERS CO. By:____________________________________________________ Authorized Signatory GOLDMAN SACHS CREDIT PARTNERS L.P. By:_____________________________________________________ Authorized Signatory BANK OF MONTREAL By:_____________________________________________________ Authorized Signing Officer ACCEPTED AS OF THE DATE ABOVE: CANADIAN NATIONAL RAILWAY COMPANY By:___________________________________________ Name: Title: NY1-568162 EXECUTION 6 ANNEX A In the event that any or all of the Lead Lenders become involved in any capacity in any action, proceeding or investigation brought by or against any person, including, without limitation, stockholders of the Company or Target, in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letter (together, the ``Letters''), the Company periodically will reimburse such Lead Lender or Lenders, as the case may be, for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Company also will indemnify and hold each Lead Lender harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of such Lead Lender in performing the services that are the subject of the Letters. If for any reason the foregoing indemnification is unavailable to any Lead Lender, or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by such Lead Lender as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and its stockholders on the one hand and such Lead Lender on the other hand, in the matters contemplated by the Letters as well as the relative fault of the Company and such Lead Lender with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of each Lead Lender, and the partners, directors, agents, employees and controlling persons (if any), as the case may be, of each Lead Lender, and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, each Lead Lender, any such affiliate and any such person. The Company also agrees that none of the Lead Lenders or any of their respective affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company, any person asserting claims on behalf of or in right of the Company or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or bad faith of such Lead Lender in performing the services that are the subject of the Letters. Prior to entering into any agreement or arrangement with respect to, or effecting, any proposed sale, exchange, dividend or other distribution or liquidation of all or a significant portion of its assets in one or a series of transactions or any significant recapitalization or reclassification of its outstanding securities that does not directly or indirectly provide for the assumption of the obligations of the Company set forth in this Annex A, the Company will notify each Lead Lender in writing thereof (if not so previously notified) and, if requested by the Lead Lenders, shall arrange in connection therewith alternative means of providing for the obligations of the Company set forth in this paragraph, including the assumption of such obligations by another party, insurance, surety bonds or the creation of an escrow, in each case in an amount and upon terms and conditions satisfactory to the Lead Lenders. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto. The Company agrees that any suit or proceeding arising out of either this arrangement or any matter referred to in the Letters may be brought in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in the City of New York, and the Company agrees to submit to the jurisdiction of, and to venue in, such courts. The provisions of this Annex A shall survive any termination of the arrangement provided by the Letters, and this Commitment Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. NY1-568162 Annex A-1 EXECUTION 7 ANNEX B Summary of Terms and Conditions of the Senior Facilities This Summary of Terms and Conditions outlines certain terms of the Senior Facilities referred to in the Commitment Letter, of which this Annex B is a part. Certain capitalized terms used herein are defined in the Commitment Letter and shall have the same meaning when used herein. Borrowers: Canadian National Railway Company (the ``Company'') with respect to 50% of each of the Senior Facilities, and Grand Trunk Corporation or another U.S. subsidiary of the Company (``U.S. Borrower''; each of the Company and U.S. Borrower is referred to herein as a ``Borrower'' and collectively as the ``Borrowers'') with respect to the remaining 50% of each of the Senior Facilities; provided, however, that the percentages of the Senior Facilities to be borrowed by each Borrower may be reallocated by the Lead Lenders with the consent of the Company. Guarantors: Amounts borrowed under Senior Facilities by each Borrower shall be guaranteed by the other Borrower, and each of the Company's material subsidiaries (i.e., subsidiaries with a tangible net worth of 2% or more of the consolidated tangible net worth of the Company and its subsidiaries), whether now existing or hereafter formed, shall guaranty (collectively, such guarantees are referred to herein as the ``Guaranties'') all obligations under the Senior Facilities; provided that the Target and its subsidiaries shall not be obligated to provide Guaranties until permitted to do so under applicable law. Arranger, Advisor Goldman Sachs Credit Partners L.P. and/or its designated and Syndication affiliates. Agent: Arranger and Bank of Montreal (``BMO''). Administrative Agent: NY1-568162 Annex B-1 EXECUTION 8 Lenders: The Lead Lenders and/or other banks and financial institutions (the ``Lenders'') selected by the Lead Lenders in consultation with, and with the consent of, the Company, such consent not to be unrea- sonably withheld; provided that the Lenders shall be banks or financial institutions the payments of interest and fees to which are not subject to withholding taxes in Canada or the U.S., as the case may be. Amount of Senior US$1.8 billion senior loan (the ``Senior Facilities'') Facilities: to include: (i) US$800 million senior term loans (the ``Term Loan''); (ii) US$1 billion senior revolving credit facility (the ``Revolving Facility''). At the option of the Company, all or any portion of the Revolving Facility available to the Company may be funded in Canadian Dollars. Availability: Term Loan: One drawing may be made under the Term Loan on the Closing Date. Revolving Facility: Amounts available under the Revolving Facility may be borrowed on and after the Closing Date until the maturity date of the Revolving Facility. Purpose/Use of Term Loan: To finance the Acquisition, to refinance Proceeds: certain existing indebtedness and to pay fees and expenses associated therewith. Revolving Facility: To finance the Acquisition, to refinance certain existing indebtedness and to pay fees and expenses associated therewith, and for the working capital and general corporate needs (including, without limitation, commercial paper ``backstop'') of the Borrowers and their respective subsidiaries. Maturity: Term Loan: 1 year from the Closing Date Revolving Facility: 5 years from the Closing Date NY1-168162 Annex B-2 EXECUTION 9 Closing Date: The date on or before March 31, 1998 on which the initial borrowings under the Senior Facilities are made. Amortization: None. Letters of At the Borrowers' option, up to US$200 million of the Credit: Revolving Facility (consisting of up to US$100 million (whether such letters of credit are denominated in U.S. or Canadian Dollars) under the portion of the Revolving Facility available to the Company and up to US$100 million under the portion of the Revolving Facility available to the U.S. Borrower) will be made available for the issuance of letters of credit (``Letters of Credit''). Interest Rate: All loans outstanding under the Senior Facilities shall bear interest, at the Borrowers' option, as follows: With respect to the Term Loan: A. at the Base Rate; or B. at the Eurodollar Rate plus the Applicable Margin per annum. With respect to loans outstanding under the Revolving Facility: A. at the Base Rate; B. at the Eurodollar Rate plus the Applicable Margin per annum; or C. in the case of loans that are funded in Canadian Dollars, at the Canadian Bankers Acceptance Rate plus the Applicable Margin per annum. The Applicable Margin (and the Facility Fee, as described below) shall be determined based upon the Company's long term senior unsecured debt ratings from time to time as established by Standard & Poor's Corporation (the ``S&P Rating'') and Moody's Investors Service, Inc. (the ``Moody's Rating'') as set forth below: NY1-168162 Annex B-3 EXECUTION 10
Level Rating Applicable Facility Margin Fee 1 A- or A3 or higher .195% .080% 2 BBB+ or Baa1 .250% .100% 3 BBB or Baa2 .275% .125% 4 BBB- or Baa3 .300% .150% 5 BB+ or Ba1 .475% .200% 6 BB or Ba2 or lower .675% .250%
; provided that, at any time more than 50% of the Senior Facilities have been drawn, the A pplicable Margin, as determined above, shall be increa sed by .05%. With respect to the determination of the Applicable Margin (and the Facility Fee) pursuant to the S&P Rating and Moody's Rating set forth above, if the S&P Rating and Moody's Rating are not in the same Level, then (x) in the event that there is no more than one level of difference between the Ratings, the level shall be the higher of the S&P Rating and the Moody's Rating and (y) in the event there is more than one Level of difference between the S&P Rating and the Moody's Rating, the Applicable Margin and the Facility Fee shall be the average of the Applicable Margins and Facility Fees, respectively, based upon the two Levels. With respect to any loans made under the Revolving Facility after the Closing Date, a competitive bid rate pricing option shall be made available under customary terms and conditions. For so long as any of the Senior Facilities are outstanding, the Borrowers shall pay to the Administrative Agent for the account of each Lender quarterly in arrears a Facility Fee (determined on the basis of the applicable Level as set forth above) calculated on each Lender's pro rata share of the outstanding amount of the Senior Facilities and any unfunded commitments thereunder in effect from time to time. The Facility Fee shall accrue from the Closing Date. As used herein, (x) the terms ``Base Rate'', ``Canadian Bankers Acceptance Rate'' and ``Eurodollar Rate'' shall have the meanings that are customary and appropriate for financings of this type. Interest on any overdue amounts under the Senior Facilities shall accrue at a rate equal to the Base Rate plus an additional two percentage points (2.00%) per annum and shall be payable on demand. NY1-168162 Annex B-4 EXECUTION 11 Interest Monthly for loans bearing interest with reference to the Base Payments: Rate; on the last day of selected interest periods (which shall be one, two, three and six months; except that, prior to the earlier of 60 days after the Closing Date and completion of primary syndication of the Senior Facilities, only interest periods of one month may be selected) for loans bearing interest with reference to the Eurodollar Rate (and at the end of every three months, in the case of interest periods of longer than three months); and upon prepayment, in each case payable in arrears and computed on the basis of a 360-day year with respect to loans bearing interest at a rate determined by reference to the Eurodollar Rate and a 365-day year with respect to loans bearing interest at a rate determined by reference to the Base Rate or the Canadian Bankers Acceptance Rate. Letter of The fronting fee payable to BMO, as the issuing Lender, and the Credit Fees: other fees payable by the Borrowers with respect to each Letter of Credit shall be specified in the Loan Documents. Underwriting As specified in the separate Fee Letter dated as of the date Fees: hereof. Voluntary The commitments under the Revolving Facility may be permanently Commitment reduced by the Borrowers from time to time in whole or in part Reductions without premium or penalty. The Senior Facilities may be and prepaid in whole or in part without premium or penalty; Prepayments: provided that if loans bearing interest with reference to the Eurodollar Rate are prepaid on a day other than the last day of the related interest period, any ``broken funding'' costs in connection with such prepayment shall be paid by the Borrowers. Mandatory In the event the capital stock or any of the assets of Target Prepayments: or any of its subsidiaries are sold (other than asset sales or network rationalizations in the ordinary course of business) at any time the Voting Trust (as hereinafter defined) is effective, the Company shall immediately apply the net proceeds thereof actually received by the Company and its subsidiaries (other than subsidiaries held through the Voting Trust) to repay the Senior Facilities. NY1-168162 Annex B-5 EXECUTION 12 Any such mandatory prepayments shall be applied without penalty or premium (except for breakage costs, if any), to repay, first, the Term Loans and second, outstanding loans under the Revolving Facility (with corresponding commitment reductions); provided, however, that such prepayment of loans under the Revolving Facility shall not be required if (i) the Company's S&P Rating is BBB or higher or its Moody's Rating is Baa2 or higher and (ii) the commitments under the Revolving Facility do not exceed US$700 million. Any such mandatory prepayments of the Term Loans or the Revolving Facility shall be applied pro rata to the loans to each Borrower under the applicable Senior Facility. Representations Customary and appropriate including, without limitation due and Warranties: organization and authorization, execution, delivery and enforce ability of the Loan Documents, financial condition, no material adverse change, title to properties, litigation, payment of taxes, compliance with laws, environmental and pension matters, consents and approvals and full disclosure. Covenants: Customary and appropriate affirmative and negative covenants, including, without limitation, financial covenants related to minimum fixed charge coverage (provided that such financial covenant shall not apply so long as the Company's S&P Rating is BBB+ or higher or its Moody's Rating is Baa1 or higher), a maximum ratio of total debt to total capitalization and a minimum tangible net worth requirement (such financial covenants to be structured in a manner appropriate for credits of this nature). Other covenants will include, without limitation, limitations on liens, investments, mergers and acquisitions, and sales of assets, including exceptions and baskets to be mutually agreed upon. Events of Default: Customary and appropriate including, without limitation, failure to make payments when due or within an applicable grace period, defaults under other indebtedness in excess of specified amounts to be agreed upon, noncompliance with covenants (with grace periods where appropriate), breaches of representations and warranties, bankruptcy, judgments in excess of specified amounts, invalidity of Guaranties, and ``changes of control'' (to be defined in a mutually agreed upon manner). NY1-568162 Annex B-6 EXECUTION 13 Conditions 1. Satisfactory Documentation. The definitive documentation Precedent evidencing the Senior Facilities shall be prepared by to Initial counsel to the Arranger and shall be in form and Borrowings: substance reasonably satisfactory to the Arranger and the Lenders. 2. Acquisition Structure and Documentation. The structure utilized to consummate the Acquisition (including, without limitation, the Voting Trust) and the definitive documentation relating thereto (the ``Definitive Acquisition Documents'') and the terms and conditions thereof shall be in form and substance reasonably satisfactory to the Lead Lenders (it being understood that such structure shall be satisfactory in form and substance to Lead Lenders if substantially as set forth in the draft merger agreement delivered to Lead Lenders most recently prior to their execution of this Commitment Letter), and the Definitive Acquisition Documents shall be in full force and effect in all material respects. 3. Consummation of Tender Offer. Merger Sub shall have acquired not less than the Minimum Shares pursuant to the Tender Offer, and all other aspects of the Tender Offer shall have been consummated pursuant to the Definitive Acquisition Documents, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of the Agents. 4. Discharge of Existing Debt and Liens. Concurrently with or prior to the borrowing under the Senior Facilities, to the extent necessary to permit the consummation of the Acquisition and the borrowings contemplated under the Senior Facilities, pre-existing indebtedness of the Company and its subsidiaries under their existing revolving credit agreements shall have been repaid. 5. Existing Debt of Target. Concurrently with or prior to the borrowing under the Senior Facilities, the terms of any material pre-existing indebtedness of Target and its subsidiaries shall have been modified or waived or such indebtedness shall have been repaid, in each case to the extent necessary to permit the consummation of the Acquisition and the borrowings contemplated under the Senior Facilities. NY1-168162 Annex B-7 EXECUTION 14 6. Environmental Matters. The Lenders shall have received information in form, scope and substance reasonably satisfactory to the Lead Lenders concerning any environmental liabilities. 7. No Material Adverse Change. Since September 30, 1997, there shall not have been (x) any material adverse change in or effect on, either individually or in the aggregate, the condition, operations, properties, business or results of operations of the Company and its subsidiaries, taken as a whole, or of Target and its subsidiaries, taken as a whole, which adversely affects or could reasonably be expected to adversely affect the ability of the Company and its subsidiaries, taken as a whole, or of Target and its subsidiaries, taken as a whole, to perform any of their obligations under the Senior Facilities or (y) any information submitted to Arranger or Administrative Agent that proves to have been inaccurate, incomplete or misleading in any material respect. No information, condition or event shall have occurred or come to the attention of the Lenders after the date of execution of the Commitment Letter that (i) relates to the Company or Target or their respective subsidiaries, (ii) is inconsistent with the written information previously disclosed to the Lead Lenders in connection with the Senior Facilities and (iii) would reasonably be expected to result in a material adverse change in or effect on, either individually or in the aggregate, the condition, operations, properties, business or results of operations of the Company, Target and their respective subsidiaries, taken as a whole, which change or effect adversely affects or could reasonably be expected to adversely affect the ability of the Company, Target and their respective subsidiaries, taken as a whole, to perform any of their obligations under the Senior Facilities. 8. Financial Statements. The Lenders shall have received (x) the audited financial statements for the Company and its subsidiaries and the audited financial statements (or, if audited financial statements are unavailable, unaudited financial statements) for Target and its subsidiaries, in each case for the year ending December 31, 1997, (y) a pro forma balance sheet prepared in accordance with U.S. GAAP for the Company and its subsidiaries giving effect to the Acquisition and (z) financial projections for Company and its subsidiaries after giving effect to the Acquisition for a period of not less than five years following the Closing Date. NY1-168162 Annex B-8 EXECUTION 15 9. Consents and Approvals. All necessary governmental and shareholder approvals and all material third party approvals required in connection with the Senior Facilities and the Acquisition (other than approval of the Acquisition from the STB) shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any applicable authority. Without limiting the generality of the foregoing, the Company shall have received an informal non-binding opinion of the federal Surface Transportation Board (the ``STB'') that any voting trust established in connection with the Acquisition (the ``Voting Trust'') meets the requirements of the STB and shall have filed with the STB a copy of any such voting trust and a copy of any Schedule 13D filed with the Securities and Exchange Commission in connection with the Acquisition. 10. Payments of Amounts Due. All costs, fees, expenses (including, without limitation, reasonable legal fees and expenses and recording taxes and fees) and other compensation contemplated hereby payable to the Arranger, Syndication Agent, the Administrative Agent, Co-Documentation Agents or the Lenders shall have been paid to the extent incurred prior to the Closing Date and invoiced at least one business day prior to the Closing Date. 11. Customary Closing Documents. All documents required to be delivered under the definitive financing documents, including customary legal opinions, corporate records and documents from public officials and officers' certificates, shall have been delivered. Conditions Prior written notice of borrowing, the accuracy of to All representations and warranties, and the absence of any default or Borrowings: potential event of default. Assignments The Lenders may assign all or, in an amount of not less than and US$10 million, any portion of their share of the Senior Participa- Facilities to affiliates or one or more banks, financial tions: institutions or other entities that are eligible assignees (to be described in the Loan Documents) which are acceptable to the Borrowers and the Administrative Agent, such consent not to be unreasonably withheld, and upon such assignment, such affiliate, bank, financial institution or entity shall become a Lender for all purposes of the loan documentation; provided that assignments made to affiliates of Lenders and other Lenders shall not be subject to the US$10 million minimum assignment requirement. The Lenders will have the right to sell participations, subject to customary limitations on voting rights, in their share of the Senior Facilities. NY1-168162 Annex B-9 EXECUTION 16 Requisite Lenders holding 51% of total commitments or exposure under Lenders: the Senior Facilities, except that (x) any amendment which would disproportionately affect the obligation of any obligor to make payment of the loans under the Revolving Facility or the Term Loan shall not be effective without the approval of holders of 51% of such class of holders and (y) any amendment with respect to certain matters relating to the interest rates, maturity and the definition of Requisite Lenders, Requisite Lenders will be defined as Lenders holding 100% of total commitments or exposure under the Senior Facilities. Taxes, Reserve All payments are to be made free and clear of any taxes Requirements and (other than taxes on overall net income and franchise taxes Indemnities: imposed in lieu thereof), imposts, assessments, withholdings or other deductions whatsoever. The Borrowers will indemnify the Lenders against breakage costs and all increased costs of capital resulting from reserve requirements or otherwise imposed, in each case subject to customary increased costs, capital adequacy and similar provisions to the extent not taken into account in the calculation of the Base Rate or the Eurodollar Rate. Indemnity: The Borrowers will provide standard indemnification for the Arranger, Syndication Agent, Administrative Agent, Co-Documentation Agents and Lenders with an exception for gross negligence or wilful misconduct. Governing Law The Borrowers and each Guarantor will submit to the and Jurisdiction: non-exclusive jurisdiction and venue of the federal and state courts of the State of New York and shall waive any right to trial by jury. New York law shall govern the Loan Documents. The foregoing is intended to summarize certain basic terms of the Senior Facilities. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Senior Facilities. NY1-168162 Annex B-10 EXECUTION EX-99.C.1 12 AGREEMENT AND PLAN OF MERGER 1 CONFORMED COPY AGREEMENT AND PLAN OF MERGER dated as of February 10, 1998 among CANADIAN NATIONAL RAILWAY COMPANY BLACKHAWK MERGER SUB, INC. AND ILLINOIS CENTRAL CORPORATION 2 TABLE OF CONTENTS(1) PAGE SECTION 1.01. The Offer........................... 2 SECTION 1.02. IC Action........................... 3 SECTION 1.03. Voting Trust........................ 4 SECTION 1.04. Alternative Transaction Structures.. 5 SECTION 2.01. The Merger.......................... 6 SECTION 2.02. Conversion of Shares................ 6 SECTION 2.03. The Exchange Agent.................. 8 SECTION 2.04. Surrender and Payment............... 8 SECTION 2.05. No Appraisal Rights................. 10 SECTION 2.06. Fractional Shares................... 10 SECTION 2.07. Stock Options....................... 10 SECTION 2.08. Withholding Rights.................. 12 SECTION 3.01. Certificate of Incorporation........ 12 SECTION 3.02. Bylaws.............................. 12 SECTION 3.03. Directors and Officers.............. 13 SECTION 4.01. Corporate Existence and Power....... 14 SECTION 4.02. Corporate Authorization............. 14 SECTION 4.03. Governmental Authorization.......... 14 SECTION 4.04. Non-Contravention................... 15 SECTION 4.05. Capitalization...................... 15 SECTION 4.06. Subsidiaries........................ 16 SECTION 4.07. SEC Filings......................... 16 SECTION 4.08. Financial Statements................ 17
(1)The Table of Contents is not a part of this Agreement. 3 SECTION 4.09. Disclosure Documents................. 17 SECTION 4.10. Absence of Certain Changes........... 18 SECTION 4.11. No Undisclosed Material Liabilities.. 19 SECTION 4.12. Litigation........................... 20 SECTION 4.13. Taxes................................ 20 SECTION 4.14. Employee Benefit Plans............... 20 SECTION 4.15. Labor Matters........................ 22 SECTION 4.16. Takeover Statutes; Rights Plans...... 23 SECTION 4.17. Compliance with Laws................. 23 SECTION 4.18. Finders' Fees........................ 23 SECTION 4.19. Environmental Matters................ 23 SECTION 4.20. Opinion of Financial Advisor......... 25 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CN AND MERGER SUBSIDIARY SECTION 5.01. Corporate Existence and Power........ 26 SECTION 5.02. Corporate Authorization...............26 SECTION 5.03. Governmental Authorization............26 SECTION 5.04. Non-Contravention.....................26 SECTION 5.05. Capitalization........................27 SECTION 5.06. Subsidiaries..........................27 SECTION 5.07. SEC Filings...........................28 SECTION 5.08. Financial Statements..................29 SECTION 5.09. Disclosure Documents..................29 SECTION 5.10. Absence of Certain Changes............30 SECTION 5.11. No Undisclosed Material Liabilities...31 SECTION 5.12. Litigation............................31 SECTION 5.13. Taxes.................................31 SECTION 5.14. Employee Benefit Plans................32 SECTION 5.15. Compliance with Laws..................32 SECTION 5.16. Finders' Fees.........................33 SECTION 5.17. Environmental Matters.................33 SECTION 5.18. Ownership of IC Common Stock..........33 SECTION 5.19. Sufficiency of Funds..................33 SECTION 5.20. Labor Matters.........................33 ARTICLE 6 COVENANTS OF IC SECTION 6.01. Conduct of IC.........................34 SECTION 6.02. Access to Information.................38 4 SECTION 6.03. Other Offers............................39 SECTION 6.04. Notices of Certain Events...............40 SECTION 6.05. Registration Rights.....................40 SECTION 6.06. Antitakeover Statutes...................41 ARTICLE 7 COVENANTS OF CN SECTION 7.01. Conduct of CN...........................42 SECTION 7.02. Access to Information...................43 SECTION 7.03. Notices of Certain Events...............43 SECTION 7.04. Obligations of Merger Subsidiary........43 SECTION 7.05. Voting of Shares........................44 SECTION 7.06. Director and Officer Liability..........44 SECTION 7.07. Stock Exchange Listing..................44 ARTICLE 8 COVENANTS OF CN AND IC SECTION 8.01. Reasonable Best Efforts..................45 SECTION 8.02. STB Approval.............................45 SECTION 8.03. Certain Filings..........................45 SECTION 8.04. Public Announcements.....................46 SECTION 8.05. Dividends................................46 SECTION 8.06. Auditors' Letters........................46 SECTION 8.07. Treatment of IC Employees and Directors..46 SECTION 9.01. Preparation of the.......................50 Form F-4; Proxy or Information Statement; Action by Written Consent SECTION 9.02. Fees and Expenses........................51 SECTION 9.03. Further Assurances.......................52 ARTICLE 10 CONDITIONS TO THE MERGER SECTION 10.01. Conditions to the Obligations of Each Party to the Merger....................................52 SECTION 10.02. Additional Condition to the Obligations of IC......52 ARTICLE 11 TERMINATION 5 SECTION 11.01. Termination............................ 53 SECTION 11.02. Effect of Termination.................. 55 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Notices................................ 56 SECTION 12.02. Definitions............................ 57 SECTION 12.03. Survival............................... 60 SECTION 12.04. Amendments; No Waivers; Continuing Directors........................... 61 SECTION 12.05. Successors and Assigns................. 61 SECTION 12.06. Governing Law.......................... 62 SECTION 12.07. Counterparts; Effectiveness............ 62 SECTION 12.08. Entire Agreement; No Third Party Beneficiaries....................... 62 SECTION 12.09. Submission to Jurisdiction; Waivers.... 63 SECTION 12.10. Enforcement............................ 63 SECTION 12.11. Guarantee of Merger Subsidiary......... 63 SECTION 12.12. Disclosure Schedules................... 63 EXHIBIT A Form of Voting Trust Agreement EXHIBIT B Certificate of Incorporation of Surviving Corporation EXHIBIT C Bylaws of Surviving Corporation EXHIBIT D Terms and Conditions of Alternate Merger
6 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of February 10, 1998 among Canadian National Railway Company, a Canadian corporation ("CN"), Blackhawk Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of CN ("MERGER SUBSIDIARY") and Illinois Central Corporation, a Delaware corporation ("IC"). The parties hereto agree as follows: WHEREAS, IC operates a rail freight transportation business through Illinois Central Railroad Company, an Illinois corporation and a wholly-owned subsidiary of IC, CCP Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of IC, and IC Financial Services Corporation, a Delaware corporation and a wholly-owned subsidiary of IC (Illinois Central Railroad Company, CCP Holdings, Inc. and IC Financial Services Corporation collectively, the "RAILROAD SUBSIDIARIES"); WHEREAS, the Board of Directors of IC (at a meeting duly called and held), has unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger (as hereinafter defined) are fair to, and in the best interests of, the holders of shares of Blackhawk Common Stock (as hereinafter defined) and recommended acceptance of the Offer and adoption of this Agreement by the stockholders of IC; WHEREAS, the respective Boards of Directors of Merger Subsidiary and CN have approved, and deem it advisable and in the best interests of their respective stockholders to consummate, the business combination contemplated hereby upon the terms and subject to the conditions set forth herein; WHEREAS, it is intended that, except as provided in Section 1.04, the business combination contemplated hereby be accomplished by having Merger Subsidiary commence a cash tender offer for an aggregate of 46,051,761 outstanding shares of common stock, par value $0.001 per share, of IC ("IC COMMON STOCK"), representing 75% of the currently outstanding shares of IC Common Stock, to be followed by a merger of Merger Subsidiary with and into IC, upon the terms and subject to the conditions set forth herein; WHEREAS, on the date hereof, Messrs. Gilbert H. Lamphere and Alexander P. Lynch have entered into binding agreements with CN (the "INVESTMENT COMMITMENT AGREEMENTS") with respect to the shares of IC Common Stock and options to purchase shares of IC Common Stock owned by them, pursuant to which they agree (i) to consent to (or vote their shares of IC Common Stock in favor of) the 7 adoption of this Agreement, (ii) to roll over 100% of their options into options to purchase shares of CN Common Stock (as hereinafter defined) and (iii), in the case of Mr. Lamphere, to invest a certain portion of the proceeds received in the Merger in shares of CN Common Stock (as hereinafter defined) within 90 days of the Effective Time (as hereinafter defined); WHEREAS, IC, Merger Subsidiary and CN desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby and also to prescribe various conditions to the transactions contemplated hereby; NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties, intending to be legally bound, agree as follows: ARTICLE 1 THE OFFER SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have been terminated and nothing shall have occurred that would result in a failure to satisfy any of the conditions set forth in Annex I hereto, Merger Subsidiary shall, as promptly as practicable after the date hereof, but in no event later than five business days following the public announcement of the terms of this Agreement, commence an offer (the "OFFER") to purchase an aggregate of 46,051,761 outstanding shares of IC Common Stock at a price of $39.00 per share, net to the seller in cash. The Offer shall be subject to the condition that there shall be validly tendered in accordance with the terms of the Offer prior to the expiration date of the Offer and not withdrawn a number of shares which, together with the shares then owned by CN, represents at least 50.1% of the outstanding shares of IC Common Stock on a fully diluted basis (the "MINIMUM CONDITION") and to the other conditions set forth in Annex I hereto. Merger Subsidiary reserves the right to waive any of the conditions to the Offer, to extend the Offer if any conditions to this Offer are not satisfied and to make any change in the terms or conditions of the Offer; provided that, except as provided in Section 1.04, no waiver or change may be made without the prior written consent of IC which (i) increases or decreases the number of shares of IC Common Stock sought in the Offer, (ii) changes the form of consideration to be paid or decreases the price per share, (iii) waives the Minimum Condition, (iv) waives the conditions set forth in paragraph (a), (b) or (e) of Annex I hereto, (v) waives the condition relating to the expiration of the waiting period (if any) under the Hart-Scott Rodino Antitrust Improvements 2 8 Act of 1976 (the "HSR ACT") or the receipt of a favorable informal advisory opinion from the STB, (vi) is adverse to the holders of IC Common Stock or modifies any of the conditions to the Offer or (vii) imposes any conditions to the Offer in addition to those set forth in Annex I. CN agrees that, if the Offer shall not have been consummated at the scheduled expiration thereof due to the failure to satisfy (i) any of the conditions to the Offer set forth in clauses (a) or (b) of Annex I, (ii) the condition to the Offer relating to expiration of the waiting period under the HSR Act or (iii) the condition relating to the receipt of the favorable informal advisory opinion from the STB staff, CN will, at the request of IC, cause Merger Subsidiary to extend the Offer for a period of up to twenty business days. (b) Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition) and the terms of this Agreement, CN shall provide the funds to Merger Subsidiary and Merger Subsidiary shall pay, as promptly as practicable after the expiration of the Offer, for all shares of IC Common Stock properly tendered and not withdrawn pursuant to the Offer that Merger Subsidiary is obligated to purchase. (c) As soon as practicable on the date of commencement of the Offer, CN and Merger Subsidiary shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will contain the offer to purchase and form of the related letter of transmittal (together with any supplements or amendments thereto, collectively the "OFFER DOCUMENTS"). CN and IC each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect. CN agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of IC Common Stock, in each case as and to the extent required by applicable federal securities laws. IC and its counsel shall be given an opportunity to review and comment on the Schedule 14D-1 prior to its being filed with the SEC. SECTION 1.02. IC Action. (a) IC hereby consents to the Offer and represents that its Board of Directors, at a meeting duly called and held, has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger (as defined in Section 2.01), are fair to, advisable and in the best interests of IC's stockholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, in accordance with the requirements of the General Corporation Law of the State of Delaware (the "DELAWARE LAW"), and (iii) resolved to recommend acceptance of the Offer and adoption of this Agreement by its stockholders; provided, however, that prior to the earlier of (x) the consummation of the Offer or (y) the adoption of this Agreement by the 3 9 stockholders of IC, the Board of Directors of IC may modify, withdraw or change such recommendation to the extent that the Board of Directors concludes in good faith, based on the advice of outside counsel, that such action is reasonably necessary in order for the Board of Directors to act in a manner consistent with the Board's fiduciary duties under applicable law. IC further represents that Lehman Brothers Inc. and The Beacon Group Capital Services LLC have delivered to IC's Board of Directors their written opinions that the consideration to be received in the Offer and the Merger taken together is fair to the holders of shares of IC Common Stock from a financial point of view. To the knowledge of IC, all of the directors and executive officers of IC intend either to tender their shares of IC Common Stock pursuant to the Offer or to consent to or vote in favor of the adoption of the Agreement. (b) As soon as practicable after the Offer is commenced IC will file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9") which shall reflect the recommendations of IC's Board of Directors referred to above; provided, however, that prior to the earlier of (x) the consummation of the Offer or (y) the adoption of this Agreement by the stockholders of IC, the Board of Directors of IC may modify, withdraw or change such recommendation to the extent that the Board of Directors concludes in good faith, based on the advice of outside counsel, that such action is reasonably necessary in order for the Board of Directors act in a manner consistent with the Board's fiduciary duties under applicable law. IC and CN each agree promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect. IC agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of shares of IC Common Stock, in each case as and to the extent required by applicable federal securities laws. CN and its counsel shall be given an opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. SECTION 1.03. Voting Trust. The parties agree that, (i) simultaneously with the purchase by CN, Merger Subsidiary or their Affiliates of shares of IC Common Stock pursuant to the Offer or otherwise, such shares shall be deposited in an irrevocable voting trust (the "VOTING TRUST") in accordance with the terms and conditions of a voting trust agreement (the "VOTING TRUST AGREEMENT") substantially in the form attached hereto as Exhibit A and (ii) upon consummation of the Merger, all outstanding shares of the Surviving Corporation shall be deposited in the Voting Trust. Subject to applicable law and to the rules, regulations and practices of the United States Surface Transportation Board (the "STB"), the Voting Trust Agreement may be modified or amended at any time by CN in its sole discretion; provided that (i) prior to the Effective Time, the Voting Trust Agreement may not be modified or amended without the prior written 4 10 approval of IC unless such modification or amendment is not inconsistent with this Agreement and is not adverse to IC or its stockholders and would not reasonably be expected to have an adverse effect on receipt of a favorable informal advisory opinion from the STB and (ii) prior to or after the Effective Time, the Voting Trust Agreement may not be modified or amended without the prior written approval of IC if such modification or amendment would reasonably be expected to increase the liability exposure of the Board of Directors of the Surviving Corporation under applicable law. No power of CN or Merger Subsidiary provided for in the Voting Trust Agreement may be exercised in a manner which violates this Agreement. CN, in consultation with IC, shall use its best efforts to take, or cause to be taken, all actions necessary, proper or advisable to obtain a favorable informal advisory opinion from the STB staff. In furtherance and not in limitation of the foregoing, CN and IC agreed that: (i) CN shall make any filings required by the STB with respect to the Voting Trust and IC shall make any filings required by CN; (ii) CN shall consult with IC in connection with any discussions or proceedings initiated by CN with the STB with respect to the Voting Trust; provided that IC shall not initiate any such discussions or proceedings without CN's prior written consent; and (iii) CN with IC's consent, shall change or modify the terms of the Voting Trust Agreement to the extent required by the STB as a condition to the issuance of such advisory opinion, so long as the required changes or modifications do not, in the aggregate, materially affect CN's rights thereunder. Any trustee of the Voting Trust appointed by CN and Merger Subsidiary pursuant to the Voting Trust Agreement shall be reasonably satisfactory to the Board of Directors of IC. SECTION 1.04. Alternative Transaction Structures. Notwithstanding anything to the contrary set forth in this Agreement, if the Minimum Condition has not been satisfied prior to the scheduled expiration of the Offer (as such Offer may have been extended pursuant to Section 1.01(a) hereof), Merger Subsidiary shall have the right at its option to extend the Offer for a period of up to twenty business days. If, at the scheduled expiration of the Offer (as such date may have been extended by Merger Subsidiary as contemplated by the preceding sentence), the Minimum Condition has not been satisfied, then (unless the parties otherwise agree) at CN's election either (i) Merger Subsidiary shall amend the terms of the Offer by increasing the number of shares sought in the Offer to all of the outstanding shares of IC Common Stock, subject to the conditions set forth in Section 1.01, in which event the Agreement shall be modified as provided in Part I of Exhibit D, or (ii) Subsidiary shall terminate the Offer and Merger Subsidiary and IC shall proceed with the Merger, in accordance with this Agreement in which event the terms and conditions of the Merger Agreement shall be modified as provided in Part II of Exhibit D. 5 11 ARTICLE 2 THE MERGER SECTION 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary shall be merged (the "MERGER") with and into IC in accordance with the Delaware Law, whereupon the separate existence of Merger Subsidiary shall cease, and IC shall be the surviving corporation (the "SURVIVING CORPORATION"). (b) As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger, IC and Merger Subsidiary will file a certificate of merger with the Secretary of State of the State of Delaware and make all other filings or recordings required by Delaware Law in connection with the Merger. The Merger shall become effective at such time as the certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such later time as the parties hereto shall agree and as is specified in the certificate of merger (the "EFFECTIVE TIME"). (c) From and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of IC and Merger Subsidiary, all as provided under Delaware Law. SECTION 2.02. Conversion of Shares. Subject to Section 1.04, at the Effective Time: (a) each share of IC Common Stock held by IC as treasury stock or owned of record or beneficially by CN or any Subsidiary of CN immediately prior to the Effective Time (including the shares of IC Common Stock held in the Voting Trust) shall be canceled, and no payment shall be made with respect thereto. (b) each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation and each such share shall be deposited in the Voting Trust; (c) if Merger Subsidiary shall have purchased, pursuant to the Offer, an aggregate of 46,051,761 shares of IC Common Stock, each share of IC Common Stock outstanding immediately prior to the Effective Time shall, except as provided in Section 2.02(a), be converted into the right to receive that number of duly authorized, validly issued, fully paid and nonassessable shares, without par 6 12 value, of CN ("CN COMMON STOCK") equal to the fraction (the "EXCHANGE RATIO") obtained by dividing $39.00 by the CN Average Closing Price (the "STOCK CONSIDERATION"). For purposes of this Agreement, "CN AVERAGE CLOSING PRICE" means the average closing price of the CN Common Stock on the New York Stock Exchange, Inc. (the "NYSE") for the twenty trading day period ending on the second trading day prior to the date of the Effective Time; provided that if such average closing price is less than $43.00 then the CN Average Closing Price shall be $43.00 and if such average closing price is greater than $64.50 then the CN Average Closing Price shall be $64.50. (d) if Merger Subsidiary shall have purchased, pursuant to the Offer, an aggregate of less than 46,051,761 shares of IC Common Stock, each share of IC Common Stock outstanding immediately prior to the Effective Time shall, except as provided in Section 2.02(a), be converted into the right to receive: (A) a number of shares of CN Common Stock (1) equal to the fraction obtained by dividing $39.00 by the CN Average Closing Price, multiplied by (2) the Stock Proration Factor (as defined below); and (B) cash in an amount equal to the product of (1) 1 minus the Stock Proration Factor, multiplied by (2) $39.00. The consideration provided for in this Section 2.02, together with the consideration provided for in Section 2.06 hereof, and, if applicable, the consideration provided for in Exhibit D, is referred to herein as the "MERGER CONSIDERATION". For purposes of this Agreement, the "STOCK PRORATION FACTOR" shall be a fraction, of which (A) the numerator shall be the Stock Number and (B) the denominator shall be the total number of shares of IC Common Stock outstanding as of the Effective Time, minus the number of shares purchased by Merger Subsidiary pursuant to the Offer. The "STOCK NUMBER" shall be 15,350,586, plus any shares of IC Common Stock issued after the date of this Agreement in accordance with this Agreement. If prior to the Effective Time, CN or IC (as the case may be) should, (after obtaining the consent required by Section 7.01(c) or Section 6.01(i) hereof) split, combine or otherwise reclassify the CN Common Stock or the IC Common Stock, or pay a stock dividend or other stock distribution in CN Common Stock or IC Common Stock, or otherwise change the CN Common Stock or IC Common Stock into any other securities, or make any other such stock dividend or distribution in capital stock of CN or IC in respect of the CN Common Stock or 7 13 the IC Common Stock, respectively, then the Stock Consideration will be appropriately adjusted to reflect such split, combination, dividend or other distribution or change. SECTION 2.03. The Exchange Agent. Prior to the mailing of the IC proxy or information statement, Merger Subsidiary shall appoint an agent (the "EXCHANGE AGENT") for the purpose of exchanging certificates formerly representing shares of IC Common Stock for the Merger Consideration. The Exchange Agent shall also make all computations as to the allocation and the proration contemplated by Section 2.02, and any such computation shall be conclusive and binding on the holders of shares of IC Common Stock. SECTION 2.04. Surrender and Payment. (a) As soon as reasonably practicable as of or after the Effective Time, CN shall deposit with the Exchange Agent, for the benefit of the holders of shares of IC Common Stock, for exchange in accordance with this Article 2, the Merger Consideration. Promptly after the Effective Time, CN will send, or will cause the Exchange Agent to send, to each holder of shares of IC Common Stock at the Effective Time a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the certificates representing such shares to the Exchange Agent). (b) Each holder of shares of IC Common Stock that have been converted into a right to receive the Merger Consideration, upon surrender to the Exchange Agent of a certificate or certificates formerly representing such shares, together with a properly completed letter of transmittal covering such shares, will be entitled to receive the Merger Consideration payable in respect of such shares. Until so surrendered, each such certificate shall, after the Effective Time, represent for all purposes, only the right to receive such Merger Consideration. No interest will be paid or will accrue on any cash payable as Merger Consideration, in lieu of any fractional shares of CN Common Stock or otherwise payable pursuant to this Article 2. (c) If any portion of the Merger Consideration is to be paid to a Person other than the registered holder of the shares of IC Common Stock formerly represented by the certificate or certificates surrendered in exchange therefor, it shall be a condition to such payment that the certificate or certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such shares or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. 8 14 (d) After the Effective Time, there shall be no further registration of transfers of shares of IC Common Stock. If, after the Effective Time, certificates formerly representing shares of IC Common Stock are presented to the Surviving Corporation, they shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article 2. The Surviving Corporation shall be obligated to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by IC on such shares of IC Common Stock in accordance with the terms of this Agreement on or prior to the Effective Time and which remain unpaid at the Effective Time. (e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.04(a) that remains unclaimed by the holders of shares of IC Common Stock six months after the Effective Time shall be returned to CN, upon demand, and any such holder who has not exchanged his shares of IC Common Stock for the Merger Consideration in accordance with this Section prior to that time shall thereafter look only to CN for payment of the Merger Consideration in respect of his shares. Notwithstanding the foregoing, CN shall not be liable to any holder of shares of IC Common Stock for any amount paid to a public official pursuant to applicable escheat or similar abandoned property laws. Any amounts remaining unclaimed by holders of shares of IC Common Stock two years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental entity) shall, to the extent permitted by applicable law, become the property of CN free and clear of any claims or interest of any Person previously entitled thereto. (f) No dividends or other distributions with respect to any CN Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate for shares of IC Common Stock with respect to the shares of CN Common Stock represented thereby (if any) and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.06 until the surrender of such certificate in accordance with this Article 2. Subject to the effect of applicable laws, following surrender of any such certificate, there shall be paid to the holder of the certificate representing whole shares of any CN Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender the amount of cash payable in lieu of a fractional share of CN Common Stock to which such holder is entitled pursuant to Section 2.06 and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of CN Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such 9 15 surrender and with a payment date subsequent to such surrender payable with respect to such whole shares of CN Common Stock. SECTION 2.05. No Appraisal Rights. In accordance with Schwabacher v. United States, 334 U.S. 182 (1948), stockholders of IC shall not have any appraisal or like rights; provided, however, that if the STB or a court of competent jurisdiction determines that appraisal rights are available to holders of shares of IC's capital stock, then such holders shall be provided with appraisal rights in accordance with Delaware Law to the extent required under Delaware Law. IC shall give CN prompt notice of any demands received by IC for appraisal of shares of IC Common Stock, and CN shall have the right to participate in all negotiations and proceedings with respect to such demands. IC shall not, except with the prior written consent of CN, make any payment with respect to, or settle or offer to settle, any such demands or as otherwise required by applicable law. SECTION 2.06. Fractional Shares. (a) No certificates or scrip representing fractional shares of CN Common Stock shall be issued upon the surrender for exchange of certificates representing shares of IC Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of CN. (b) Notwithstanding any other provision of this Agreement, each holder of shares of IC Common Stock who pursuant to the Merger would otherwise have been entitled to receive a fraction of a share of CN Common Stock (after taking into account all shares of IC Common Stock delivered by such holder) shall receive, in lieu thereof, an amount in cash determined by multiplying the average closing price of the CN Common Stock on the NYSE for the five trading day period prior to the Effective Time (the "CN AVERAGE PRICE") by the fraction of a share of CN Common Stock to which such holder would otherwise have been entitled. SECTION 2.07. Stock Options. (a) To the extent permitted under the rules, regulations and practices of the STB and consistent with the application of applicable Canadian securities laws and the rules and regulations of relevant stock exchanges, the Board of Directors of CN and IC shall adopt such resolutions or take such other actions as may be required to adjust the terms of each outstanding employee or director stock option to purchase shares of IC Common Stock granted under any employee or director stock option or compensation plan or arrangement ("IC OPTIONS") as necessary to provide that at the Effective Time each IC Option outstanding immediately prior to the Effective Time shall be: (i) if Section 2.02(c) is applicable, amended and converted into options ("CN OPTIONS") to acquire, on the same terms and conditions as 10 16 were applicable under such IC Options (except that such CN Options shall (other than as provided in Section 8.07(a)) be fully vested), a number of shares of CN Common Stock determined by multiplying the number of shares of IC Common Stock subject to such IC Option by the Exchange Ratio, rounded, if necessary, up to the nearest whole share of CN Common Stock, at a price per share equal to (y) the aggregate exercise price for the shares of IC Common Stock subject to such IC Option, divided by, (z) the number of shares of CN Common Stock subject to such CN Option; (ii) if Section 2.02(d) is applicable, amended and converted into: (A) CN Options to acquire, on the same terms and conditions as were applicable under such IC Options (except that such CN Options shall (other than as provided in Section 8.07(a)) be fully vested), a number of shares of CN Common Stock determined by multiplying the number of shares of IC Common Stock subject to such IC Option by the Exchange Ratio and the Stock Proration Factor, rounded, if necessary, up to the nearest whole share of CN Common Stock, at a price per share equal to (x) the aggregate exercise price for the shares of IC Common Stock subject to such IC Option, multiplied by (y) the Stock Proration Factor, and divided by, (z) the number of shares of CN Common Stock subject to such CN Option, and (B) an additional CN Option to purchase a number of shares of CN Common Stock determined as follows: (1) 1 minus the Stock Proration Factor (the "RECIPROCAL STOCK PRORATION FACTOR"), multiplied by (2) the number of shares of IC Common Stock subject to such IC Option, multiplied by (3) $39.00, and divided by (4) the CN Average Price, rounded, if necessary, up to the nearest whole share of CN Common Stock, at a price per share equal to (a) the aggregate exercise price for the shares of IC Common Stock subject to such IC Option, multiplied by (b) Reciprocal Stock Proration Factor, and divided by (c) the number of shares of CN Common Stock subject to such CN Option; or (iii) in the event that CN elects to tender for all of IC's shares pursuant to Section 1.04, amended and converted into a CN Option to purchase a number of shares of CN Common Stock determined as follows: (1) the number of shares of IC Common Stock subject to such IC Option, multiplied by (2) $39.00, and divided by (3) the CN Average Price, rounded, if necessary, up to the nearest whole shares of CN Common Stock, at a price per share equal to (a) the aggregate exercise price for the shares of IC Common Stock subject to such IC Option, divided by (b) the number of shares of CN Common Stock subject to such CN Option. (b) If and to the extent the Board of Directors of CN is not permitted, in the opinion of CN's counsel, to take the actions described in paragraph (a) hereof, 11 17 then at or immediately prior to the Effective Time, IC shall take action so that the holder of each IC Option then outstanding shall receive cash equal to: (1) the number of shares of IC Common Stock subject to such IC Option, multiplied by (20 $39.00, minus (3) the aggregate exercise price for the shares of IC Common Stock subject to such IC Option. (c) CN shall take all corporate actions necessary to reserve for issuance such number of shares of CN Common Stock as will be necessary to satisfy exercises in full of all CN Options after the Effective Time. With respect to such shares of CN Common Stock issuable upon exercise of the CN Options and the resale of such shares of CN Common Stock issuable upon exercise of the CN Options and the resale of such shares of CN Common Stock by Affiliates of CN (subject to any limitations under applicable law) CN shall (i) as soon as practicable after the Effective Time file with the SEC a Registration Statement on Form S-8 and use its reasonable best efforts to have such registration statement become and remain continuously effective under the Securities Act of 1933, as amended (the "SECURITIES ACT") and (ii) file with the NYSE, the Toronto Stock Exchange, the Montreal Exchange and other national exchanges on which the CN Common Stock is traded a listing application and use its reasonable best efforts to have such shares admitted to trading thereon upon exercises of CN Options. SECTION 2.08. Withholding Rights. CN shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 2 such amounts as it is required to deduct and withhold in respect of such payment under any provision of federal, state, local or foreign tax law. To the extent that amounts are so withheld by CN, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of IC Common Stock in respect of which such deduction and withholding was made by CN, as the case may be. ARTICLE 3 THE SURVIVING CORPORATION SECTION 3.01. Certificate of Incorporation. The certificate of incorporation of IC shall be amended in the Merger to read in its entirety as set forth on Exhibit B hereto and as so amended shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable law. 12 18 SECTION 3.02. Bylaws. The bylaws of IC shall be amended in the Merger to read in their entirety as set forth on Exhibit C hereto and as so amended shall be the by-laws of the Surviving Corporation until amended in accordance with applicable law. SECTION 3.03. Directors and Officers. (a) Except as set forth herein, the directors of IC as of the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until they otherwise cease to be directors of the Surviving Corporation and the officers of IC as of the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until they otherwise cease to be officers of the Surviving Corporation. Promptly following consummation of the Offer, IC anticipates appointing John D. McPherson as the Chief Executive Officer and a director of IC. (b) Effective upon consummation of the Offer, and subject to the rules, regulations and practices of the STB, IC shall have taken all action necessary to cause an individual, who shall be identified as a suitable candidate by CN prior to the consummation of the Offer and who shall be independent of CN and reasonably satisfactory to the Board of Directors of IC, to be appointed to the Board of Directors of IC immediately following the resignations of Gilbert H. Lamphere and Alexander P. Lynch from the IC Board of Directors. IC's obligations to appoint such individual to the Board of Directors shall be subject to the rules, regulations and practices of the STB. (c) Effective upon consummation of the Offer, CN shall have taken all action necessary to appoint Mr. E. Hunter Harrison to the position of Chief Operating Officer of CN. (d) Effective upon consummation of the Offer, CN shall have taken all necessary action to cause Messrs. Gilbert H. Lamphere and Alexander P. Lynch to be elected to serve on the Board of Directors of CN. In addition, either Mr. Lamphere or Mr. Lynch will have the right (and CN will take all necessary action to cause Mr. Lamphere or Mr. Lynch) to be appointed to serve on the Strategic Planning Committee, the Audit and Finance Committee, the Human Resources Committee and the Corporate Governance Committee of such Board of Directors, it being understood that no more than one of such individuals will have the right to be appointed to any one of such committees, and such individuals shall be entitled to determine on which of such committees they elect to be appointed. 13 19 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF IC Except as set forth in the IC disclosure schedules delivered by IC to CN at or prior to the execution of this Agreement and referenced therein by Section number, IC represents and warrants to CN that: SECTION 4.01. Corporate Existence and Power. IC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. IC is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. IC has heretofore delivered to CN true and complete copies of IC's restated certificate of incorporation and bylaws as currently in effect. SECTION 4.02. Corporate Authorization. The execution, delivery and performance by IC of this Agreement and the consummation by IC of the transactions contemplated hereby are within IC's corporate powers and, except for any required approval by IC's stockholders in connection with the consummation of the Merger, have been duly authorized by all necessary corporate action. The affirmative vote of a majority of the outstanding shares of IC Common Stock is the only vote of any class or series of IC's capital stock necessary to adopt the Agreement. This Agreement constitutes a valid and binding agreement of IC. SECTION 4.03. Governmental Authorization. The execution, delivery and performance by IC of this Agreement and the consummation by IC of the transactions contemplated by this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority the failure to make which would have a Material Adverse Effect other than (a) the filing of a certificate of merger in accordance with Delaware Law; (b) compliance with any applicable requirements of the HSR Act; (c) compliance with any applicable requirements of the STB related to the Voting Trust or approval or exemption of the Merger; (d) compliance with any applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (the "EXCHANGE ACT"), the Securities Act and any foreign or state securities or Blue Sky laws; and (e) approvals of relevant stock exchanges and such filings, authorizations, orders and approvals required under Canadian or other foreign laws. 14 20 SECTION 4.04. Non-Contravention. The execution, delivery and performance by IC of this Agreement and the consummation by IC of the transactions contemplated hereby do not and will not (a) contravene or conflict with the restated certificate of incorporation or bylaws of IC, (b) assuming compliance with the matters referred to in Section 4.03, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to IC or any IC Subsidiary, (c) (x) give rise to a right on the part of any Person to require repayment by IC or any IC Subsidiary under any agreement, contract or other instrument binding upon IC or any IC Subsidiary or (y) constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of IC or any IC Subsidiary or to a loss of any benefit to which IC or any IC Subsidiary is entitled under any provision of any agreement, contract or other instrument binding upon IC or any IC Subsidiary or any license, franchise, permit or other similar authorization held by IC or any IC Subsidiary, or (d) result in the creation or imposition of any Lien on any asset of IC or any IC Subsidiary except, in the case of clauses (b), (c) and (d), for such matters as would not, individually or in the aggregate, have a Material Adverse Effect or materially impair the ability of IC to consummate the transactions contemplated by this Agreement. For purposes of this Agreement, "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. SECTION 4.05. Capitalization. The authorized capital stock of IC consists of 100,000,000 shares of IC Common Stock and 5,000,000 shares of preferred stock, $.01 par value per share. As of December 31, 1997, (i) 61,402,347 shares of IC Common Stock were issued and outstanding, (ii) 3,220,609 shares were held by IC in its treasury and (iii) employee and director stock options to purchase an aggregate of 2,564,502 shares were outstanding (of which options to purchase an aggregate of 1,190,641 shares were exercisable). All outstanding shares of capital stock of IC have been duly authorized and validly issued and are fully paid and nonassessable. Except as contemplated by this Agreement or as set forth in this Section and except for changes since December 31, 1997 resulting from the exercise of employee stock options outstanding on such date, there are outstanding (a) no shares of capital stock or other voting securities of IC, (b) no securities of IC convertible into or exchangeable for shares of capital stock or voting securities of IC, and (c) no options or other rights to acquire from IC, and no obligation of IC to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of IC (the items in clauses 4.05(a), 4.05(b) and 4.05(c) being referred to collectively as the "IC SECURITIES"). There are no outstanding obligations of IC or any Subsidiary to repurchase, redeem or otherwise acquire any IC Securities. 15 21 SECTION 4.06. Subsidiaries. (a) Each IC Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 4.06, all IC Subsidiaries and their respective jurisdictions of incorporation are identified in IC's annual report on Form 10-K for the fiscal year ended December 31, 1996 (the "IC 10-K"). (b) All of the outstanding capital stock of, or other ownership interests in, each IC Subsidiary, is owned by IC, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). There are no outstanding (i) securities of IC or any IC Subsidiary convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any IC Subsidiary, or (ii) options or other rights to acquire from IC or any IC Subsidiary, and no other obligation of IC or any IC Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any IC Subsidiary (the items in clauses 4.06(b)(i) and 4.06(b)(ii) being referred to collectively as the "IC SUBSIDIARY SECURITIES"). There are no outstanding obligations of IC or any IC Subsidiary to repurchase, redeem or otherwise acquire any outstanding IC Subsidiary Securities. SECTION 4.07. SEC Filings. (a) IC has delivered to CN (i) IC's annual reports on Form 10-K for its fiscal years ended December 31, 1995 and 1996, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended after December 31, 1996, (iii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of IC held since December 31, 1996, and (iv) all of its other reports, statements, schedules and registration statements filed with the SEC since December 31, 1996 (the documents referred to in this Section 4.07(a) being referred to collectively as the "IC SEC FILINGS"). IC's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 1997 is referred to herein as the "IC 10-Q". (b) As of its filing date, each IC SEC Filing complied as to form in all material respects with the Securities Act and the Exchange Act. 16 22 (c) As of its filing date, each IC SEC Filing filed pursuant to the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (d) Each such registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act as of the date such statement or amendment became effective did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 4.08. Financial Statements. Except as set forth in Schedule 4.08, the audited consolidated financial statements and unaudited consolidated interim financial statements of IC included in the IC SEC Filings fairly present, in all material respects, in conformity with United States generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of IC and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). For purposes of this Agreement, "IC BALANCE SHEET" means the consolidated balance sheet of IC as of September 30, 1997 set forth in the IC 10-Q and "IC BALANCE SHEET DATE" means September 30, 1997. SECTION 4.09. Disclosure Documents. (a) Each document required to be filed by IC with the SEC in connection with the transactions contemplated by this Agreement (the "IC DISCLOSURE DOCUMENTS"), including, without limitation, the Schedule 14D-9 and any amendments or supplements thereto will, when filed, comply as to form in all material respects with the applicable requirements of the Exchange Act. The representations and warranties contained in this Section 4.09 will not apply to statements or omissions included in the IC Disclosure Documents based upon information furnished to IC in writing by Merger Subsidiary or CN specifically for use therein. (b) The information with respect to IC or any IC Subsidiary that IC furnishes to CN in writing specifically for use in the CN Disclosure Documents (as defined in Section 5.09) will not, at the time of the filing thereof and, at the time of any distribution thereof (or with respect to the IC proxy or information statement, at the time of the taking of action by written consent by the trustee of the Voting Trust in connection with the Merger), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 17 23 SECTION 4.10. Absence of Certain Changes. Since the IC Balance Sheet Date and prior to the date of this Agreement, except as set forth in Schedule 4.10, IC and the IC Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been: (a) any event, occurrence or development of a state of circumstances or facts which has had or would reasonably be expected to have a Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of IC Common Stock (other than quarterly cash dividends on IC Common Stock not in excess of $0.23 per share per quarter and having customary record and payment dates), or any repurchase, redemption or other acquisition by IC or any IC Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interests in, IC or any IC Subsidiary; (c) any amendment of any term of any outstanding security of IC or any IC Subsidiary; (d) other than borrowings under existing credit facilities, replacements therefor and refinancings thereof, any incurrence, assumption or guarantee by IC or any IC Subsidiary of any indebtedness for borrowed money, other than (i) intercompany indebtedness or (ii) indebtedness in the ordinary course of business on terms consistent with past practice not exceeding an aggregate principal amount of $50,000,000; (e) any creation or assumption by IC or any IC Subsidiary of any Lien securing indebtedness on any material asset, other than (i) Liens securing intercompany indebtedness or (ii) Liens in the ordinary course of business consistent with past practice not exceeding $25,000,000; (f) any making of any loan, advance or capital contributions to or investment in any Person other than loans, advances or capital contributions to or investments in wholly-owned Subsidiaries made in the ordinary course of business consistent with past practice and not exceeding $50,000,000; (g) any transaction or commitment involving the acquisition or disposition of assets (other than inventory) other than (i) capital expenditures specified on Schedule 4.10(g), (ii) in the ordinary course of 18 24 business in accordance with past practice or (iii) any such acquisition or disposition not in excess of $20,000,000; (h) any material change in any method of accounting or accounting practice by IC or any IC Subsidiary, except for any such change required by reason of a concurrent change in United States generally accepted accounting principles; or (i) other than in the ordinary course of business consistent with past practice, any (i) material grant of any severance or termination pay to (x) any employee of IC or any IC Subsidiary or (y) any director or officer of IC or any IC Subsidiary, (ii) material increase in benefits payable under any existing severance or termination pay policies or employment agreements, (iii) except as set forth on Schedule 4.10, entering into of any material employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director or officer of IC or any IC Subsidiary, (iv) establishment, adoption or material amendment (except as required by applicable law) of any material collective bargaining, bonus, profit sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of IC or any IC Subsidiary other than in the ordinary course of business consistent with past practice, or (v) material increase in compensation, bonus or other benefits payable to directors or officers. SECTION 4.11. No Undisclosed Material Liabilities. There are no liabilities of IC or any IC Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, of a nature required by United States generally accepted accounting principles to be reflected, reserved for or disclosed in the consolidated financial statements of IC and its consolidated Subsidiaries, other than: (a) liabilities disclosed or provided for in the IC Balance Sheet or the IC SEC Filings prior to the date hereof; (b) other liabilities (including liabilities incurred in the ordinary course of business consistent with past practice since the IC Balance Sheet Date), which would not, individually or in the aggregate, have a Material Adverse Effect; and (c) liabilities under this Agreement. 19 25 SECTION 4.12. Litigation. Except as set forth on Schedule 4.12 and except as set forth in the IC SEC Filings prior to the date hereof, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or to the knowledge of IC threatened against or affecting, IC or any IC Subsidiary or any of their respective properties before any court or arbitrator or any governmental body, agency or official which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or which, as of the date of this Agreement, is reasonably expected to prevent, enjoin, alter or materially delay the Offer or the Merger or any of the other transactions contemplated hereby. SECTION 4.13. Taxes. Except as reflected in the IC Balance Sheet and the notes thereto, as reflected in Schedule 4.13, and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect with respect to IC, (i) all United States federal, state, local and foreign tax returns required to be filed by IC or any IC Subsidiary have been timely filed or requests for extensions have been timely filed and any such extension shall have been granted and not expired, and all such filed returns are complete and accurate in all material respects; (ii) IC and each IC Subsidiary have paid, or have made adequate provision or have set up an adequate accrual or reserve for the payment of all taxes, interest, additions and penalties owing by IC or any IC Subsidiary; (iii) there is no outstanding audit examination, deficiency or refund litigation with respect to any taxes owed by IC or any IC Subsidiary; (iv) all taxes, interest, additions, and penalties due with respect to completed and settled examinations or concluded litigation have been paid in full or have been recorded as a liability on IC Balance Sheet; (v) neither IC nor any IC Subsidiary is a party to any tax sharing or similar agreement pursuant to which IC or any IC Subsidiary has indemnified another party with respect to taxes; and (vi) neither IC nor any IC Subsidiary has waived any applicable statute of limitations with respect to any taxes. SECTION 4.14. Employee Benefit Plans. (a) Schedule 4.14 identifies each material Employee Plan. IC has furnished to CN copies of the material Employee Plans (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and the most recent actuarial valuation report prepared in connection with any Employee Plan and, if applicable, the Internal Revenue Service determination letters. No Employee Plan is a Title IV Plan. (b) As of the IC Balance Sheet Date, the aggregate unfunded liability of IC and any IC Subsidiary in respect of all Employee Plans or Benefit Arrangements described under Sections 4(b)(5) or 401(a)(1) of ERISA, computed 20 26 using reasonable actuarial assumptions and determined as if all benefits under such plans were vested and payable as of such date, did not exceed $17,500,000. (c) No transaction prohibited by Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any employee benefit plan or arrangement which is covered by Part 4, Title I of ERISA, which transaction has or will cause IC or any IC Subsidiary to incur any liability under ERISA, the Code or otherwise which would reasonably be expected to result in a Material Adverse Effect, excluding transactions effected pursuant to and in compliance with a statutory or administrative exemption. Neither IC nor any ERISA Affiliate of IC has (i) except where the failure thereof would not reasonably be expected to result in a Material Adverse Effect, engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii) incurred, or reasonably expects to incur prior to the Effective Time, (A) any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in either case could become a liability of IC or any IC Subsidiary or CN or any of its ERISA Affiliates after the Effective Time which would reasonably be expected to have a Material Adverse Effect. (d) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination, and, to IC's knowledge, nothing has occurred since that determination that would adversely affect such determination in a manner which would reasonably be expected to have a Material Adverse Effect. Each Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code, except to the extent that failure to so comply would not reasonably be expected to have a Material Adverse Effect. (e) Schedule 4.14 identifies each material Benefit Arrangement. IC has furnished to CN copies or descriptions of each material Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof. Each Benefit Arrangement has been maintained in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations and has been maintained in good standing with applicable regulatory authorities, except to the extent that failure to so comply would not reasonably be expected to have a Material Adverse Effect. (f) Except as set forth on Schedule 4.14 and except as provided in this Agreement, there is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of IC or any IC Subsidiary that, 21 27 individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code, to the extent that such payments would reasonable be expected to have a Material Adverse Effect. (g) Except as set forth on Schedule 4.14 and except as provided in this Agreement, no employee or former employee of IC or any IC Subsidiary will become entitled to any bonus, retirement, severance, job security or similar benefit or enhanced such benefit (including acceleration of vesting or exercise of an incentive award) as a result of the transactions contemplated hereby, to the extent that such benefits would reasonably be expected to have a Material Adverse Effect. SECTION 4.15. Labor Matters. IC and the IC Subsidiaries are in compliance with all currently applicable legislation in the various jurisdictions where they operate, with respect to terms and conditions of employment of their workforce, including legislation governing unionized labor, and wages and laws, and are not engaged in any unfair labor practice, failure to comply with which or engagement in which, as the case may be, would reasonably be expected to have a Material Adverse Effect. Except as disclosed in Schedule 4.15, (i) neither IC nor any IC Subsidiary is a party, or is otherwise subject, to any collective bargaining agreement or other labor union contract applicable to its employees, (ii) there are no material activities or proceedings by a labor union or representative thereof to organize any employees of IC or any IC Subsidiary outside of the ordinary course of business, (iii) there are no pending negotiations between IC or any IC Subsidiary and any labor union or representative thereof regarding any proposed material changes to any existing national collective bargaining agreement, (iv) there are no pending, and IC and the IC Subsidiaries have not experienced since September 30, 1997, any labor disputes, lockouts, strikes, slowdowns, work stoppages, or threats thereof which would reasonably be expected to have a Material Adverse Effect, (v) IC and the IC Subsidiaries are not in default and have not breached in any material respect the terms of any applicable collective bargaining or other labor union contract, and there are no material grievances outstanding against IC, any IC Subsidiary or their employees under any such agreement or contract which would reasonably be expected to have a Material Adverse Effect, (vi) there is no unfair labor practice complaint pending, or to the knowledge of IC threatened, against IC or any IC Subsidiary before the National Labor Relations Board or any other investigation, charge, prosecution, suit or other proceeding before any court or arbitrator or any governmental body, agency or official relating to the employees of IC or any IC Subsidiary or the representation thereof which would reasonably be expected to have a Material Adverse Effect, (vii) there are no claims or actions pending, or to the knowledge of IC threatened, between IC and any IC Subsidiary and any of their employees or 22 28 labor organizations representing or seeking to represent such employees which would reasonably be expected to have a Material Adverse Effect and (viii) to the knowledge of IC, there are no facts or circumstances involving any employee that would form the basis of, or give rise to, any cause of action, including, without limitation, unlawful termination based on discrimination of any kind that would reasonably be expected to result in a Material Adverse Effect. SECTION 4.16. Takeover Statutes; Rights Plans. No "fair price", "moratorium", "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States (with the exception of Section 203 of the Delaware Law) applicable to IC or any IC Subsidiary is applicable to the Merger or the other transactions contemplated hereby. As of the date of this Agreement, IC does not have any shareholder rights plan or similar antitakeover device in effect. The action of the Board of Directors of IC in approving the Merger, this Agreement and the Voting Trust is sufficient to render inapplicable to the Merger and this Agreement and the Voting Trust (and the transactions provided for herein and therein) the restrictions on "business combinations" (as defined in Section 203 of the Delaware Law) set forth in Section 203 of the Delaware Law. SECTION 4.17. Compliance with Laws. Except as set forth in IC SEC Filings prior to the date hereof, neither IC nor any IC Subsidiary is in violation of, or has violated, any applicable provisions of any laws, statutes, ordinances or regulations, except for such matters as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 4.18. Finders' Fees. Except for Lehman Brothers Inc. and The Beacon Group Capital Services LLC, copies of whose engagement agreements have been provided to CN, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf, of IC or any IC Subsidiary who might be entitled to any fee or commission from CN or any of its Affiliates upon consummation of the transactions contemplated by this Agreement. SECTION 4.19. Environmental Matters. (a) Except as set forth in IC SEC Filings prior to the date hereof, and except as would not, individually or in the aggregate, have a Material Adverse Effect: (i) no written notice, notification, demand, complaint, penalty, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no action, claim, suit, legal proceeding or, to the knowledge of IC, investigation or review is pending, or to the knowledge of IC, threatened by any 23 29 governmental entity or other Person with respect to any matters relating to IC or any IC Subsidiary and relating to or arising out of any Environmental Law; (ii) to the knowledge of IC there are no liabilities of or relating to IC or any IC Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, and there are no facts, conditions, situations or set of circumstances which would reasonably be expected to result in or be the basis for any such liability; (iii) except as set forth in Schedule 4.19, no property now or, to the knowledge of IC, previously, owned, leased or operated by IC or any IC Subsidiary or, to the knowledge of IC, any property to which IC or any IC Subsidiary has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances is listed or, to the knowledge of IC, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list of sites requiring investigation or clean-up; and (iv) IC and IC Subsidiaries are in compliance with all Environmental Laws and have obtained and are in compliance with all IC Environmental Permits; such IC Environmental Permits are valid and in full force and effect and will not be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby. (b) There has been no material written report regarding any environmental investigation, study, audit, test, review or other analysis conducted of which IC has knowledge in relation to the current or prior business of IC or any IC Subsidiary or any property or facility now or previously owned, leased or operated by IC or any IC Subsidiary which has not either been made available to CN prior to the date hereof or (with respect to any such report over which IC does not have control or custody) disclosed on Schedule 4.19. (c) Neither IC nor any IC Subsidiary owns, leases or operates or has owned, leased or operated any property or has conducted any operations in New Jersey or Connecticut that would result in the New Jersey Industrial Site Recovery Act or the Connecticut Transfer Act being applicable to the transactions contemplated by this Agreement. 24 30 (d) For purposes of this Section and, to the extent applicable therein, Section 5.17 hereof, the following terms shall have the meanings set forth below: "ENVIRONMENTAL LAWS" means any applicable federal, state, local, provincial or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit, or legally binding governmental restriction or requirement, or any legally binding agreement with any governmental authority or other third party, relating to human health and safety (as relating to the environment), the environment or, as impacting human health or the environment, to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials. "IC ENVIRONMENTAL PERMITS" means all permits, licenses, franchises, certificates, approvals and other similar authorizations of governmental authorities required by Environmental Laws regarding the business of IC or any IC Subsidiary as currently conducted. "HAZARDOUS SUBSTANCES" means, in each case as regulated under any Environmental Law, any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including, without limitation, petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law. SECTION 4.20. Opinion of Financial Advisor. IC's Board of Directors has received the opinions of Lehman Brothers Inc. and The Beacon Group Capital Services LLC, financial advisors to IC, to the effect that, as of the date of this Agreement, the consideration to be received in the Offer and the Merger, taken together, is fair to IC's stockholders from a financial point of view, and such opinions have not been withdrawn. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CN AND MERGER SUBSIDIARY Except as set forth in the CN disclosure schedules delivered by CN to IC at or prior to the execution of this Agreement and referenced therein by Section number, CN and Merger Subsidiary represent and warrant to IC that: 25 31 SECTION 5.01. Corporate Existence and Power. Each of CN and Merger Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of continuance or incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Each of CN and Merger Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. CN has heretofore delivered to IC true and complete copies of the certificate of incorporation and bylaws of CN and Merger Subsidiary as currently in effect. From the date of its incorporation, Merger Subsidiary will not engage in any activities other than in connection with, or as contemplated by, this Agreement. SECTION 5.02. Corporate Authorization. The execution, delivery and performance by CN and Merger Subsidiary of this Agreement and the consummation by CN and Merger Subsidiary of the transactions contemplated hereby are within the corporate powers of CN and Merger Subsidiary and have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of each of CN and Merger Subsidiary. SECTION 5.03. Governmental Authorization. The execution, delivery and performance by CN and Merger Subsidiary of this Agreement and the consummation by CN and Merger Subsidiary of the transactions contemplated by this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority the failure to make which would have a Material Adverse Effect other than (a) the filing of a certificate of merger in accordance with Delaware Law; (b) compliance with any applicable requirements of the HSR Act; (c) compliance with any applicable requirements of the STB relating to the Voting Trust or approval or exemption of the Merger; (d) compliance with any applicable requirements of the Exchange Act, the Securities Act and any foreign or state securities or Blue Sky laws; (e) approvals of relevant stock exchanges and (f) such filings, authorizations, orders and approvals required under Canadian or other foreign laws. SECTION 5.04. Non-Contravention. The execution, delivery and performance by CN and Merger Subsidiary of this Agreement and the consummation by CN and Merger Subsidiary of the transactions contemplated hereby do not and will not (a) contravene or conflict with the certificate of incorporation or bylaws of CN and Merger Subsidiary, (b) assuming compliance with the matters referred to in Section 5.03, contravene or conflict with or 26 32 constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to CN or any CN Subsidiary, (c) constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of CN or any CN Subsidiary or to a loss of any benefit to which CN or any CN Subsidiary is entitled under any provision of any agreement, contract or other instrument binding upon CN or any CN Subsidiary or any license, franchise, permit or other similar authorization held by CN or any CN Subsidiary, or (d) result in the creation or imposition of any Lien on any asset of CN or any CN Subsidiary except, in the case of clauses (b), (c) and (d), for such matters as would not, individually or in the aggregate, have a Material Adverse Effect or materially impair the ability of CN to consummate the transactions contemplated by this Agreement. SECTION 5.05. Capitalization. The authorized capital stock of CN consists of (i) an unlimited number of shares of CN Common Stock, (ii) an unlimited number of shares of Class A Preferred Stock of CN ("CN CLASS A PREFERRED STOCK") and (iii) an unlimited number of shares of Class B Preferred Stock of CN ("CN CLASS B PREFERRED STOCK"). As of the close of business on February 3, 1998, 85,602,013 shares of CN Common Stock were issued and outstanding and employee stock options to purchase an aggregate of 1,797,074 shares of CN Common Stock (of which options to purchase an aggregate of 538,266 shares of CN Common Stock were exercisable) were outstanding. No shares of either CN Class A Preferred Stock or CN Class B Preferred Stock were outstanding as of such date. All outstanding shares of capital stock of CN have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in this Section and except for changes since February 3, 1998 resulting from the exercise of employee stock options outstanding on such date, there are outstanding (a) no shares of capital stock or other voting securities of, (b) no securities of convertible into or exchangeable for shares of capital stock or voting securities of, and (c) no options or other rights to acquire from, and no obligation of to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of (the items in clauses 5.05(a), 5.05(b) and 5.05(c) being referred to collectively as the "CN SECURITIES"). There are no outstanding obligations of CN or any CN Subsidiary to repurchase, redeem or otherwise acquire any CN Securities. SECTION 5.06. Subsidiaries. (a) All principal CN Subsidiaries (the "PRINCIPAL CN SUBSIDIARIES") and their respective jurisdictions of incorporation are identified in CN's annual information form, dated May 12, 1997 (filed with the SEC under Form 40-F dated May 16, 1997) (the "CN 40-F"). Each Principal CN Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all corporate powers and all material governmental licenses, authorizations, consents and 27 33 approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. (b) All of the outstanding capital stock of, or other ownership interests in, each Principal CN Subsidiary, is owned by CN, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests). There are no outstanding (i) securities of CN or any Principal CN Subsidiary convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Principal CN Subsidiary, and (ii) options or other rights to acquire from CN or any Principal CN Subsidiary, and no other obligation of CN or any Principal CN Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any Subsidiary (the items in clauses 5.06(b)(i) and 5.06(b)(ii) being referred to collectively as the "PRINCIPAL CN SUBSIDIARY SECURITIES"). There are no outstanding obligations of CN or any Principal CN Subsidiary to repurchase, redeem or otherwise acquire any outstanding Principal CN Subsidiary Securities. SECTION 5.07. SEC Filings. (a) CN has delivered to IC (i) the CN 40-F, (ii) its quarterly reviews (filed with the SEC under Form 6-K) for its fiscal quarters ended after May 12, 1997, (iii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of CN held since May 12, 1997, (iv) all of its other reports, statements, schedules and registration statements filed with the SEC since May 12, 1997 and (v) all of its filings made with the Ontario Securities Commission since May 12, 1997 (the documents referred to in this Section 5.07 being referred to collectively as the "CN SEC FILINGS"). CN's quarterly review on Form 6-K for its fiscal quarter ended September 30, 1997, is referred to herein as the "CN 6-K". (b) As of its filing date, each CN SEC Filing complied as to form in all material respects with the applicable requirements of the Securities Act, the Securities Act (Ontario) and the Exchange Act. (c) As of its filing date, each CN SEC Filing filed pursuant to the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. 28 34 (d) Each such registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act, the Exchange Act and the Securities Act (Ontario) as of the date such statement or amendment became effective did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 5.08. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of CN included in the CN SEC Filings fairly present, in all material respects, in conformity with Canadian generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of CN and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). For purposes of this Agreement, "CN BALANCE SHEET" means the consolidated balance sheet of CN as of September 30, 1997, set forth in the CN 6-K and "CN BALANCE SHEET DATE" means September 30, 1997. SECTION 5.09. Disclosure Documents. (a) Each document required to be filed by CN with the SEC in connection with the transactions contemplated by this Agreement (the "CN DISCLOSURE DOCUMENTS"), including, without limitation, the Offer Documents and the registration statement on Form F-4 (the "FORM F-4") to be filed with the SEC pursuant to the Securities Act in connection with the issuance of CN Common Stock in the Merger, in each case together with any amendments or supplements thereto will, when filed, comply as to form in all material respects with the applicable requirements of applicable Canadian securities laws, the Securities Act or the Exchange Act, as the case may be. The representations and warranties contained in this Section 5.09(a) will not apply to statements or omissions included in the CN Disclosure Documents based upon information furnished to CN in writing by IC specifically for use therein. (b) At the time the Form F-4 becomes effective under the Securities Act, the Form F-4 will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. At the time of the filing of any CN Disclosure Document other than the Form F-4 and at the time of any distribution thereof, such CN Disclosure Document will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations 29 35 and warranties contained in this Section 5.09(b) will not apply to statements or omissions included in the CN Disclosure Documents based upon information furnished to CN in writing by IC specifically for use therein. (c) The information with respect to CN or any CN Subsidiary that CN furnishes to IC in writing specifically for use in the IC Disclosure Documents (as defined in Section 4.09) will not, at the time of the filing thereof, at the time of any distribution thereof (or with respect to the IC proxy or information statement, at the time of the IC stockholder action by written consent in connection with the Merger), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. SECTION 5.10. Absence of Certain Changes. Other than the establishment of a wholly-owned real estate Subsidiary, the transfer of CN's beneficial interest in certain real estate assets of CN to such Subsidiary and other arrangements between CN and such Subsidiary relating thereto (the "REAL ESTATE REORGANIZATION") since the CN Balance Sheet Date, CN and the CN Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been: (a) any event, occurrence or development of a state of circumstances or facts which has had or would reasonably be expected to have a Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of CN (other than dividends in accordance with past practice, as adjusted to reflect the dividend policy of the current Board of Directors of CN), or any repurchase, redemption or other acquisition by the CN or any CN Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interests in, CN or any CN Subsidiary; (c) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of CN or any CN Subsidiary which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; (d) as of the date of this Agreement, other than borrowings under existing credit facilities, replacements therefor and refinancings thereof and borrowings required to finance the transactions contemplated hereby, any incurrence, assumption or guarantee by CN or any CN Subsidiary of 30 36 any indebtedness for borrowed money, other than intercompany indebtedness and indebtedness in the ordinary course of business on terms consistent with past practice and not exceeding an aggregate principal amount of $200,000,000; or (e) except as set forth on Schedule 5.10(e), any transaction or commitment involving the acquisition or disposition of assets (other than inventory) in the ordinary course of business in accordance with past practice and any such acquisition or disposition not in excess of $100,000,000. SECTION 5.11. No Undisclosed Material Liabilities. There are no liabilities of CN or any CN Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise of a nature required by Canadian generally accepted accounting principles to be reflected, reserved for or disclosed in the consolidated financial statements of CN and its consolidated Subsidiaries, other than: (a) liabilities disclosed or provided for in the CN Balance Sheet or the CN SEC Filings prior to the date hereof; (b) other liabilities (including liabilities incurred in the ordinary course of business consistent with past practice since the CN Balance Sheet Date or liabilities arising pursuant to the Real Estate Reorganization), which would not, individually or in the aggregate, have a Material Adverse Effect; and (c) liabilities under this Agreement. SECTION 5.12. Litigation. Except as set forth in the CN SEC Filings prior to the date hereof, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or to the knowledge of CN threatened against or affecting, CN or any CN Subsidiary or any of their respective properties before any court or arbitrator or any governmental body, agency or official which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or which, as of the date of this Agreement, is reasonably expected to prevent, enjoin, alter or materially delay the Offer or the Merger or any of the other transactions contemplated hereby. SECTION 5.13. Taxes. Except as reflected in the CN Balance Sheet and the notes thereto, as reflected in Schedule 5.13, and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect with respect to CN; (i) all federal, Canadian provincial, state, local 31 37 and foreign tax returns required to be filed by CN or any CN Subsidiary have been timely filed or requests for extensions have been timely filed and any such extensions shall have been granted and not expired, and all such filed returns are complete and accurate in all material respects; (ii) CN and each CN Subsidiary have paid, or have made adequate provision or set up an adequate accrual or reserve for the payment of all taxes, interest, additions and penalties owing by CN or any CN Subsidiary; (iii) there is no outstanding audit examination, deficiency or refund litigation with respect to any taxes owed by CN or any CN Subsidiary; (iv) all taxes, interest, additions, and penalties due with respect to completed and settled examinations or concluded litigation have been paid in full or have been recorded as a liability on the CN Balance Sheet; (v) neither CN nor any CN Subsidiary is a party to any tax sharing or similar agreement pursuant to which CN or any CN Subsidiary has indemnified another party with respect to taxes (other than any liability of CN to its wholly-owned real estate Subsidiary or of such Subsidiary to CN as a consequence of the Real Estate Reorganization); and (vi) neither CN nor any CN Subsidiary has waived any applicable statute of limitations with respect to any taxes. SECTION 5.14. Employee Benefit Plans. (a) CN undertakes to make available to IC copies of the material Employee Plans (other than Multiemployer Plans) (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto). (b) Each Employee Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code, except to the extent that failure to so comply would not reasonably be expected to have a Material Adverse Effect. (c) CN undertakes to make available to IC copies or descriptions of each material Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof. Each Benefit Arrangement has been maintained in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations and has been maintained in good standing with applicable regulatory authorities, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect. SECTION 5.15. Compliance with Laws. Except as set forth in the CN SEC Filings prior to the date hereof, neither CN nor any CN Subsidiary is in violation of, or has violated, any applicable provisions of any laws, statutes, ordinances or 32 38 regulations except for such matters as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 5.16. Finders' Fees. Except for Goldman, Sachs & Co. and Schroder & Co. Inc., copies of whose engagement agreements have been provided to IC, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf, of CN or any CN Subsidiary who might be entitled to any fee or commission from IC or any of its Affiliates upon consummation of the transactions contemplated by this Agreement. SECTION 5.17. Environmental Matters. Except as set forth in the CN SEC Filings prior to the date hereof there are no liabilities of, or relating to, CN or any CN Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law that, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect on CN. SECTION 5.18. Ownership of IC Common Stock. As of the date of this Agreement, CN and its Affiliates do not own (directly or indirectly, beneficially or of record) any shares of IC Common Stock and neither CN nor any of its Affiliates own any rights to acquire any shares of IC Common Stock, except pursuant to this Agreement. SECTION 5.19. Sufficiency of Funds. CN has received commitments from third party lenders pursuant to commitment letters (none of which has been withdrawn) the proceeds of which, together with funds of CN, will enable CN to provide Merger Subsidiary with sufficient funds to consummate the Offer, the Merger and the transactions contemplated hereby in accordance with the terms of this Agreement. SECTION 5.20. Labor Matters. CN and the CN Subsidiaries are in compliance with all currently applicable legislation in the various jurisdictions where they operate, with respect to terms and conditions of employment of their workforce, including legislation governing unionized labor, and wages and laws, and are not engaged in any unfair labor practice, failure to comply with which or engagement in which, as the case may be, would reasonably be expected to have a Material Adverse Effect. Except as disclosed in Schedule 5.20, (i) neither CN nor any CN Subsidiary is a party, or is otherwise subject, to any collective bargaining agreement or other labor union contract applicable to its employees, (ii) there are no material activities or proceedings by a labor union or representative thereof to organize any employees of CN or any CN Subsidiary outside of the ordinary course of business, (iii) there are no pending negotiations between CN or any CN Subsidiary and any labor union or representative thereof regarding any proposed 33 39 material changes to any existing national collective bargaining agreement, (iv) there are no pending, and CN and the CN Subsidiaries have not experienced since May 12, 1997, any labor disputes, lockouts, strikes, slowdowns, work stoppages, or threats thereof which would reasonably be expected to have a Material Adverse Effect, (v) CN and the CN Subsidiaries are not in default and have not breached in any material respect the terms of any applicable collective bargaining or other labor union contract, and there are no material grievances outstanding against CN, any CN Subsidiary or their employees under any such agreement or contract which would reasonably be expected to have a Material Adverse Effect, (vi) there is no unfair labor practice complaint pending, or to the knowledge of CN threatened, against CN or any CN Subsidiary before the National Labor Relations Board or the Canada Labor Relations Board or any other investigation, charge, prosecution, suit or other proceeding before any court or arbitrator or any governmental body, agency or official relating to the employees of CN or any CN Subsidiary or the representation thereof which would reasonably be expected to have a Material Adverse Effect, (vii) there are no claims or actions pending, or to the knowledge of CN threatened, between CN and any CN Subsidiary and any of their employees or labor organizations representing or seeking to represent such employees which would reasonably be expected to have a Material Adverse Effect and (viii) to the knowledge of CN, there are no facts or circumstances involving any employee that would form the basis of, or give rise to, any cause of action, including, without limitation, unlawful termination based on discrimination of any kind that could reasonably be expected to result in a Material Adverse Effect. ARTICLE 6 COVENANTS OF IC IC agrees that: SECTION 6.01. Conduct of IC. Except as otherwise expressly set forth in this Agreement, during the period from the date of this Agreement through the Control Date, IC shall, and shall cause each of its Subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice and in compliance in all material respects with all applicable laws and regulations and, to the extent consistent therewith, shall use their reasonable best efforts to preserve intact their current business organizations, use their reasonable best efforts to keep available the services of their current officers and of their key employees as a group and use their reasonable best efforts to preserve their relationships with those Persons having business dealings with them. IC, in conducting its business and operations, shall have due regard for the interests of the holders of the Trust Certificates (as defined in the Voting Trust Agreement), as investors in IC, 34 40 determined without reference to such holders' interests in railroads other than the IC or its Subsidiaries. Except as otherwise expressly set forth in this Agreement, as set forth in Schedule 6.01 or as required to implement the Rights Plan (as hereinafter defined) in accordance with and subject to clause (ii) hereof, without limiting the generality of the foregoing during the period from the date of this Agreement through the Control Date, IC shall not, and shall not permit any of its Subsidiaries to (without the prior written consent of CN): (i) other than dividends and distributions (including liquidating distributions) by a direct or indirect wholly-owned Subsidiary of IC (including the Railroad Subsidiaries) to its parent and other than regular quarterly cash dividends of $0.23 per share with respect to IC's Common Stock, (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock (except as contemplated by clause (ii) below), (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (z) purchase, redeem, retire or otherwise acquire any shares of its capital stock or the capital stock of any Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; provided that, following the Effective Time, subject to applicable legal restrictions and financial covenants contained in instruments relating to outstanding indebtedness, IC shall not decrease the aggregate amount of dividends and other distributions in respect of its outstanding capital stock from the level paid immediately prior to the Merger; (ii) issue, deliver, sell, pledge or otherwise encumber any IC Securities or any IC Subsidiary Securities or any securities convertible into, or any rights, warrants or options to acquire, any such IC Securities or any IC Subsidiary Securities, in each case other than (x) pursuant to the exercise of existing stock options, (y) grants of stock options and other stock-based employee benefits prior to the Effective Time in the ordinary course of business consistent with past practice and issuances pursuant thereto or (z) securities issued by a direct or indirect wholly-owned Subsidiary of IC to IC or a direct or indirect wholly-owned Subsidiary of IC; provided, that if any Person shall have announced an Acquisition Proposal, IC shall have the right, prior to the consummation of the Offer, to implement, modify, amend or redeem a shareholder rights plan (the "RIGHTS PLAN"), but only so long as such rights plan contains provisions reasonably satisfactory in form and substance to CN to exempt this Agreement and the transactions to be effected pursuant to this Agreement 35 41 from the plan and to assure that this Agreement and the transactions to be effected pursuant to this Agreement will not trigger such rights plan; (iii) adopt, propose or agree to any amendment to its (or any Subsidiary's) certificate of incorporation, by-laws or other comparable organizational documents; (iv) (A) without the prior written consent of CN, sell, lease, license, mortgage or otherwise encumber, voluntarily subject to any Lien or otherwise dispose of any rail lines or rights of way, it being understood that nothing contained in this clause (A) shall prevent either the sale or disposition of rail stock in the ordinary course of business or the movement of such rail stock within the IC system; provided, that if IC requests in writing that it be permitted to engage in a transaction that requires CN's consent under this clause (A) and CN does not respond within 20 days of receipt of such request, IC shall be permitted to engage in such transaction; and provided, further, that this clause (A) shall not apply with respect to any transaction entered into prior to the date of this Agreement; (B) sell, lease, license, mortgage or otherwise encumber, voluntarily subject to any Lien or otherwise dispose of any of its properties or assets (excluding rail lines or rights of way), other than (x) leases or licenses of railroad equipment and property in the ordinary course of business consistent with past practice or (y) transactions in the ordinary course of business consistent with past practice and not exceeding in the aggregate $30,000,000 on an annual basis; (v) make or agree to make any acquisition (including through a leasing arrangement) (other than of inventory and rolling stock in the ordinary course of business) or capital expenditure in excess of $50,000,000 in the aggregate on an annual basis, except for acquisitions or capital expenditures specified on Schedule 6.01(v) or pursuant to agreements and commitments entered into prior to the date of this Agreement and previously made available to CN; (vi) incur any indebtedness for borrowed money or guarantee any such indebtedness other than intercompany indebtedness except for (i) borrowings under existing credit facilities, replacements therefor and refinancings thereof or (ii) other borrowings in the ordinary course of business consistent with past practice, provided that aggregate borrowings under clauses (i) and (ii) do not exceed $200,000,000; 36 42 (vii) except for loans, advances, capital contributions or investments (x) specified on Schedule 6.01(vii) or (y) made in the ordinary course of business consistent with past practice and not exceeding $15,000,000 on an annual basis, make any loans, advances or capital contributions to, or investments in, any other Person (other than, in the case of IC, to IC or any Subsidiary or, in the case of the Railroad Subsidiaries, to a Railroad Subsidiary or any Subsidiary of a Railroad Subsidiary, as the case may be); (viii) except for elections that are required by law or are consistent with past practice, make any tax election; (ix) other than payments with respect to any judgments, pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise) other than the payment, discharge, settlement or satisfaction of claims, liabilities or obligations (A) in the ordinary course of business consistent with past practice or in accordance with their terms, (B) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of IC filed with the SEC prior to the Effective Time or (C) incurred since the date of such financial statements in the ordinary course of business consistent with past practice and with this Agreement; provided that, with respect to clause (C), none of such payments, discharges, settlements or satisfaction shall in any event exceed $15,000,000; (x) except (i) as otherwise provided in this Section 6.01 or (ii) in the ordinary course of business consistent with past practice (it being understood that the taking by IC or any of its Subsidiaries of any of the actions described in this paragraph (x) with respect to a contract involving annual payments of more than $10,000,000 shall not be in the ordinary course of business), enter into any contract or agreement involving annual payments of more than $5,000,000, modify or amend in any material respect or terminate any such contract or agreement to which IC or any of its Subsidiaries is a party, or waive, release or assign any rights or claims under any such contract or agreement that are significant to such contract or agreement; provided that in entering into contracts in the ordinary course of business, each of IC and its Subsidiaries shall act entirely in its own interest as an independent enterprise; (xi) make any material change to its accounting methods, principles or practices, except as may be required by United States generally accepted accounting principles; 37 43 (xii) except (i) for arrangements entered into in the ordinary course of business consistent with past practice, (ii) as contemplated by Section 8.07 of this Agreement or (iii) as required by applicable law, enter into, adopt or materially amend or change the funding or accrual practices of any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of IC or any of its Subsidiaries (or any other Person for whom either IC or any of its Subsidiaries will have liability), or (except for normal increases in the ordinary course of business that are consistent with past practices) materially increase in any manner the compensation or fringe benefits of any employee of IC or any IC Subsidiary (or any other Person for whom IC or any IC Subsidiary will have liability) or pay any material benefit not required by any existing plan and arrangement (including the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (xiii) enter into any agreement containing any provision or covenant (x) limiting in any material respect the ability to compete with any Person which would bind IC or any IC Subsidiary or any successor or (y) granting any concessions or rights to any railroad or other Person with respect to the use of any rail lines, yards of other fixed railroad property of IC or its Subsidiaries (whether through divestiture of lines, the grant of trackage or haulage rights or otherwise) in each case other than in the ordinary course of business consistent with past practice; or (xiv) authorize or commit or agree to take any of the foregoing actions. SECTION 6.02. Access to Information. From the date hereof through the Control Date, IC and its Subsidiaries will give CN, its counsel, financial advisors, auditors and other authorized representatives full access to the offices, properties, books and records of IC and its Subsidiaries, will furnish to CN, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request and will instruct the employees, counsel and financial advisors of IC and its Subsidiaries to cooperate with CN in its investigation of the business of IC and its Subsidiaries, as the case may be; provided that no investigation pursuant to this Section shall affect any representation or warranty given by IC to CN hereunder; 38 44 and provided further, that access to certain information of IC and its Subsidiaries may require the entry of a protective order by the STB, after which date full access shall be granted to such information consistent with this paragraph and subject to the terms of such order. IC shall hold and shall cause its officers, employees, accountants, counsel, financial advisers and other representatives and Affiliates to hold, any nonpublic information in accordance with the terms of that certain confidentiality and standstill agreement (the "CONFIDENTIALITY AGREEMENT") dated March 13, 1997, between CN and IC. SECTION 6.03. Other Offers. (a) IC agrees (i) that neither IC nor any IC Subsidiary shall, and it shall direct and use its reasonable best efforts to cause its officers, directors, employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any IC Subsidiary) not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) or any indication of interest, with respect to a merger, acquisition, consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or equity securities of, IC or any IC Subsidiary (any such proposal or offer being hereinafter referred to as an "ACQUISITION PROPOSAL"), or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person, relating to an Acquisition Proposal, or afford access to the properties, books or records of IC or any IC Subsidiary to any Person that may be considering making or has made or has stated an intention to make, an Acquisition Proposal, or release any third party from any obligations under any existing standstill agreement or arrangement, or enter into any agreement with respect to an Acquisition Proposal; (ii) that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing; and (iii) that it will notify CN (including in such notification the identity of the third party making inquiries or proposals, requesting information or access or seeking to initiate or continue negotiations or discussions, as the case may be) with reasonable promptness (but in no event later than 24 hours thereafter) if any such inquiries or proposals are received by, any such information or access is requested from, or any such negotiations or discussions are sought to be initiated or continued with, it. Notwithstanding the foregoing, IC or its Board of Directors may (x) take any action required to comply with Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal or, prior to the earlier of (A) consummation of the Offer or (B) the adoption of this Agreement by the stockholders of IC, (y) take any action as contemplated by Section 11.01(e) or (z) directly or indirectly, furnish non-public information and access to, and may participate in discussions and negotiations with, any Person in response to an unsolicited bona fide Acquisition Proposal, if the Board of Directors of IC has 39 45 concluded in good faith, based on the advice of outside counsel, that such action is reasonably necessary for the Board of Directors to act in a manner consistent with its fiduciary duties under applicable law; except that (with respect to clauses (y) and (z) hereof) prior to furnishing non-public information and access to, or participating in discussions or negotiations with, such Person, IC receives from such Person an executed confidentiality and standstill agreement with terms not in the aggregate less favorable to IC than those contained in the Confidentiality Agreement (it being understood that IC may enter into a confidentiality agreement without a standstill provision or with a standstill provision less favorable to IC provided that it waives or similarly modifies the standstill provision in the Confidentiality Agreement); provided further, that at least 48 hours prior to the entry into or announcement of an intention to enter into a definitive agreement with respect to an Acquisition Proposal, IC shall have provided written notice to CN advising CN of its intention to enter into a definitive agreement with respect to an Acquisition Proposal and specifying the material terms and conditions of such Acquisition Proposal. Within such 48 hour period, CN may propose an improved transaction. SECTION 6.04. Notices of Certain Events. IC shall promptly notify CN of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (c) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting IC or any IC Subsidiary which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.12 or which relate to the consummation of the transactions contemplated by this Agreement. SECTION 6.05. Registration Rights. IC shall, if requested by CN at any time and from time to time within three years after the termination of this Agreement, as expeditiously as possible prepare and file up to three registration statements under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all securities that have been deposited in the Voting Trust by CN, in accordance with the intended method of sale or other disposition stated by CN, including a "shelf" registration statement under Rule 415 under the Securities Act or any successor provision; and IC shall 40 46 use its reasonable best efforts to qualify such securities under any applicable state securities laws. CN agrees to use reasonable efforts to cause, and to cause any underwriters of any sale or other disposition to cause, any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis. IC shall use reasonable efforts to cause each such registration statement to become effective, to obtain all consents or waivers of other parties which are required therefore, and to keep such registration statement effective for such period not in excess of 180 calendar days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sale or other disposition. The obligations of IC hereunder to file a registration statement and to maintain its effectiveness may be suspended for one or more periods of time not exceeding 60 calendar days in the aggregate with respect to any registration statement if the Board of Directors of IC shall have determined that the filing of such registration statement or the maintenance of its effectiveness would require disclosure of nonpublic information that would materially and adversely affect IC. Any registration statement prepared and filed under this Section, and any sale covered thereby, shall be shared equally by IC and CN except for underwriting discounts or commission, brokers' fees and the fees and disbursements of CN's counsel related thereto. CN shall provide all information reasonably requested by IC for inclusion in any registration statement to be filed hereunder. If, during the time periods referred to in the first sentence of this Section, IC effects a registration under the Securities Act of IC's securities for its own account or for any other of its stockholders (other than on form S-4 or form S-8, or any successor form), it shall allow CN the right to participate in such registration, and such participation shall not affect the obligation of IC to effect demand registration statements for CN under this Section; provided that, if the managing underwriters of such offering advise IC in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, IC shall include the securities requested to be included therein by CN pro rata with the securities intended to be included therein by IC. In connection with any registration pursuant to this Section, IC and CN shall provide each other and any underwriter of the offering with customary representations, warranties, covenants, indemnification, and contribution in connection with such registration. For purposes of this Section 6.05, the term "IC" shall include any Railroad Subsidiary. SECTION 6.06. Antitakeover Statutes. Subject to the fiduciary duties of the Board of Directors of IC under applicable law, if any takeover statute is or may become applicable to the transactions contemplated hereby, IC and the members of its Board of Directors shall use all reasonable efforts to grant such approvals and to take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the 41 47 effects of any takeover statute on any of the transactions contemplated by this Agreement. ARTICLE 7 COVENANTS OF CN CN agrees that: SECTION 7.01. Conduct of CN. From the date hereof until the Effective Time, CN and the CN Subsidiaries shall conduct their business in the ordinary course consistent with past practice and shall use their commercially reasonable efforts to preserve intact their business organizations and relationships with third parties and to keep available the services of their present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the Effective Time: (a) CN will not adopt or propose any change in its articles of incorporation or bylaws; (b) CN will not take, and will not permit any CN Subsidiary to take, any action that would make any representation and warranty of CN hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time; (c) prior to the Effective Time, other than regular quarterly cash dividends not to exceed Cdn $0.265 per share with respect to CN Common Stock, CN will not (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock or (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares in its capital stock; (d) CN will not, and will not permit any CN Subsidiary to, sell, lease, license, mortgage or subject to Lien or otherwise dispose of any of its properties or assets, other than transactions in the ordinary course of business, including dispositions that are part of CN's rationalization plan or transactions not exceeding in the aggregate $200,000,000. (e) except as set forth on Schedule 7.01, CN will not, and will not permit any CN Subsidiary to, enter into an contract or arrangement or otherwise take any action that could reasonably be expected to materially 42 48 delay or otherwise interfere with the consummation of the Offer or Merger; and (f) CN will not, and will not permit any CN Subsidiary to, agree or commit to do any of the foregoing. SECTION 7.02. Access to Information. Subject to the Confidentiality Agreement, from the date hereof until the Effective Time, CN will give IC, its counsel, financial advisors, auditors and other authorized representatives full access to the offices, properties, books and records of CN and the CN Subsidiaries, will furnish to IC, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request and will instruct CN's employees, counsel and financial advisors to cooperate with IC in its investigation of the business of CN and the CN Subsidiaries; provided that no investigation pursuant to this Section shall affect any representation or warranty given by CN to IC hereunder; and provided further, that access to certain CN information may require the entry of a protective order by the STB, after which date full access shall be granted to such information consistent with this paragraph and subject to the terms of such order. CN shall hold and shall cause its officers, employees, accountants, counsel, financial advisers and other representatives and Affiliates to hold, any nonpublic information in accordance with the terms of the Confidentiality Agreement. SECTION 7.03. Notices of Certain Events. CN shall promptly notify IC of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (c) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting CN or any CN Subsidiary which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 5.12 or which relate to the consummation of the transactions contemplated by this Agreement. SECTION 7.04. Obligations of Merger Subsidiary. CN will take all action necessary to cause Merger Subsidiary to perform its obligations under this 43 49 Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. SECTION 7.05. Voting of Shares. If the Offer is consummated, then, subject to the terms of the Voting Trust Agreement, CN shall cause the trustee of the Voting Trust to effect the approval of the stockholders of IC of the Agreement by taking action by written consent of such stockholders in lieu of calling a meeting of stockholders pursuant to, and in accordance with, the requirements set forth in Section 228 of Delaware Law or, if a meeting of IC stockholders is required, to vote the shares of IC Common Stock held in the Voting Trust in favor of the adoption of this Agreement at such meeting. SECTION 7.06. Director and Officer Liability. (a) CN shall cause the Surviving Corporation, for a period of six years after the Control Date, (i) to maintain in effect in its certificate of incorporation and by-laws the current provisions regarding the elimination of liability of directors and indemnification of and advancement of expenses to officers, directors, employees and agents currently contained in the certificate of incorporation and by-laws of IC and (ii) to maintain the existing indemnification agreements covering such directors and officers of IC, copies of which have been provided to CN prior to the date of this Agreement; provided that such indemnification agreements shall be subject to any limitation imposed from time to time under applicable law. For six years after the Control Date, CN will cause the Surviving Corporation to maintain the officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Control Date covering each such Person currently covered by IC's officers' and directors' liability insurance or a substitute policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof, provided that, in satisfying its obligation under this Section, CN shall not be obligated to cause the Surviving Corporation to pay premiums in excess of 200% of the amount per annum IC paid in its last full fiscal year, which amount has been disclosed to CN; provided, further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Surviving Corporation assume the obligations set forth in this Section 7.06. SECTION 7.07. Stock Exchange Listing. CN shall use all reasonable best efforts to cause the shares of CN Common Stock to be issued in the Merger to be 44 50 approved for listing on the NYSE, the Toronto Stock Exchange and the other national securities exchanges on which the CN Common Stock is traded, subject, in each case, to official notice of issuance, prior to the Effective Time. ARTICLE 8 COVENANTS OF CN AND IC CN and IC agree that: SECTION 8.01. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each party will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. SECTION 8.02. STB Approval. CN, on the one hand and IC on the other shall, and each shall cause its Subsidiaries to, subject to the following sentences, (i) cooperate with one another to prepare and present to the STB, as soon as practicable, all filings and other presentations in connection with seeking any STB approval, exemption or other authorization necessary to consummate the transactions contemplated by this Agreement (including, without limitation, the matters contemplated by Sections 6.02 and 7.02 hereof), (ii) prosecute such filings and other presentations with diligence, (iii) diligently oppose any objections to, appeals from or petitions to reconsider or reopen any such STB approval by Persons not party to this Agreement, and (iv) take all such further action as in the reasonable judgment of CN and IC may facilitate obtaining a final order or orders of the STB approving such transactions consistent with this Agreement and the transactions contemplated herein. Without in any way limiting CN's obligations under Section 1.03 and 8.01 and subject to consultations with IC and, after giving good faith consideration to the views of IC, CN shall have final authority over the development, presentation and conduct of the STB case, including over decisions as to whether to agree to or acquiesce in conditions. IC shall take no regulatory or legal action in connection with the STB without CN's consent. SECTION 8.03. Certain Filings. CN and IC shall cooperate with one another (except with respect to the STB, which is covered by Section 8.02), in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (except with respect to the STB, which is 45 51 covered by Section 8.02), in seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. SECTION 8.04. Public Announcements. CN and IC will consult with each other before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. SECTION 8.05. Dividends. After the date of this Agreement, each of CN and IC shall coordinate with the other the payment of dividends with respect to the shares of CN Common Stock and IC Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of shares of CN Common Stock and IC Common Stock shall not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to their CN Common Stock and/or IC Common Stock or any shares of CN Common Stock that any such holder receives in exchange for such shares of IC Common Stock in connection with the Merger. SECTION 8.06. Auditors' Letters. IC and CN each shall use all reasonable best efforts to cause to be delivered to the other party and such other party's directors a letter of its independent auditors, dated the date on which the Form F-4 shall become effective, and addressed to the other party and such other party's directors, in form and substance customary for "comfort" letters delivered by independent public accountants in connection with registration statements similar to the Form F-4. SECTION 8.07. Treatment of IC Employees and Directors. (a) Outstanding Options/Restricted Stock Awards. Prior to the purchase by CN, Merger Subsidiary or their Affiliates, of shares of IC pursuant to the Offer or otherwise (the "TAKEDOWN"), IC shall take all action necessary to cause each outstanding IC Option (excluding the Unvested 2000 Options (as defined below)) and outstanding restricted stock award granted prior to the date of this Agreement or pursuant to Section 8.07(b), to be immediately vested and, in the case of options, fully exercisable, prior to the Takedown (it being understood that IC and CN shall develop a mechanism to permit any such accelerated option or stock award to be exercisable (or transferrable, as the case may be) prior to the Takedown so as to enable the holder to tender the underlying option shares and restricted stock in order to receive the Offer Price pursuant to the Offer, subject to 46 52 applicable proration. For purposes of this Agreement, the "UNVESTED 2000 OPTIONS" shall mean, for each IC director, the number of IC Options granted pursuant to the IC Directors Incentive 2000 Option Plan multiplied by (i) the number of complete months between the Takedown and April 30, 2001, and divided by (ii) 62. In addition, prior to the Effective Time, IC shall amend the IC Options held by IC's directors (excluding the Unvested 2000 Options) to provide that in the event of a termination of service of the director on or about the Control Date (or, in the case of the Transferring Directors, the Takedown), such options shall not expire prior to the expiration of their 10 year term. (b) Pending Option Grants. The Compensation Committee of the IC Board of Directors in the ordinary course has authorized, pursuant to the 1990 Long-Term Incentive Plan (the "LTIP") (and the Executive and Management Incentive Compensation Programs), the grant of options (the "1998 OPTIONS") to purchase IC Common Stock pursuant to targets achieved for the year ended December 31, 1997. Such grants shall be made in March 1998 in accordance with IC's usual procedures except that the market price of IC Common Stock utilized in calculating the IC 1997 Total Shareholder Return, which is used in determining the number of options to be granted, shall be the Offer Price. The exercise price of each 1998 Option shall be equal to fair market value on the date of grant and the other terms and conditions of each 1998 Option (including, without limitation, vesting and duration) shall be consistent with the terms applicable to ordinary employee options granted under the LTIP in March 1997. (c) 1998 Annual Bonuses. The aggregate target bonus amount of all bonuses granted to all employees under the IC Performance Compensation Program and Executive Performance Compensation Program (the "PERFORMANCE PROGRAMS") (and any and all additional cash incentive programs covering such employees) in respect of 1998 (the "1998 BONUSES") shall not exceed $8,000,000. The 1998 Bonuses shall be awarded in accordance with past practice, and the target amount, payment terms and other terms applicable to each such 1998 Bonus shall be consistent with the practice relating to the 1997 annual bonuses awarded by IC under the Performance Programs. IC shall determine, and to the extent necessary, modify and implement, the performance objectives relating to the measurement of the actual bonus payments to each individual under the 1998 Bonuses. Any such modifications shall be subject to prior approval by CN, which approval shall not be unreasonably withheld. (d) Retention Bonus. IC shall adopt a retention bonus program for its executives (other than E. Hunter Harrison) under which cash amounts ("RETENTION BONUSES") established by IC, after consultation with CN, would be payable in two equal installments, the first of which would be paid on the earlier of (i) the Control Date or (ii) April 1, 1999, and the second of which would be 47 53 payable on January 3, 2000. A retention bonus pool shall be created for such awards, the size of which pool shall be agreed to in good faith by CN and IC within 30 days following the Takedown, it being intended that the pool be not less than $5 million. The recipient, amount and other terms of each Retention Bonus shall be determined by cooperation and agreement between IC and CN and shall be subject to prior approval of each of IC and CN. (e) Amendments to IC Employment Security Agreements. IC has entered into Employment Security Agreements with certain of its executive employees ("COVERED EMPLOYEES") prior to the date hereof (the "SECURITY AGREEMENTS"). Before the Effective Time, IC shall use its reasonable best efforts to amend the Security Agreements so that: (i) if it is determined, following a Covered Employee's termination of employment as described in Section 1 of the Security Agreements, that the aggregate amount of all "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) paid or payable to such Covered Employee is greater than one hundred and five percent (105%) of the amount equal to 2.99 times the Covered Employee's applicable "base amount" (within the meaning of Section 280G(b)(3) of the Code) then IC shall pay to the Covered Employee an additional payment (the "GROSS-UP PAYMENT") such that, after payment by the Covered Employee of all excise taxes imposed under Section 4999 of the Code ("EXCISE TAXES") (and all interest and penalties imposed and all taxes and excise taxes imposed on the Gross-Up Payment) the Covered Employee would retain an amount of the Gross-Up Payment equal to the Excise Taxes imposed upon the payments and (ii) the definition of Good Reason in Section 2(b) of each Security Agreement would exclude a change in the Covered Employee's status, responsibilities, authorities or duties due solely to a change in the status of IC from a publicly traded company to a privately held Subsidiary of CN. (f) Director Retirement Plan. Effective as of the Control Date, IC shall terminate the Director Retirement Plan and make the payments set forth in Schedule 8.07. (g) Director Deferred Compensation Plan. CN shall, prior to the Takedown, assume all of IC's liabilities pursuant to its Director Deferred Compensation Plan with respect to the Transferring Directors. In addition, CN shall honor any elections the Transferring Directors have made with respect to their account balances under the plan, except that any payments due upon "retirement from the board" shall be due and payable at retirement from CN's Board of Directors, not IC's Board of Directors. (h) Employee Benefit Levels. During the period from the Effective Time until the end of the twenty-fourth month following the Effective Time, CN shall maintain or cause the Surviving Corporation to maintain salary and target annual 48 54 bonus levels at no less than such levels in effect immediately prior to the Takedown, and maintain employee long term incentive, pension and welfare plans for the benefit of employees and former employees of IC or its Subsidiaries, which are comparable, in the aggregate, to those in effect immediately prior to the Takedown. (i) Pre-Existing Conditions; Credit for Deductibles; and Past Service Credit. CN shall, or shall cause the Surviving Corporation to, (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the employees of the Surviving Corporation under any welfare plan in which such employees may be eligible to participate after the Control Date (except to the extent that such conditions, exclusions or waiting periods would apply under IC's then existing plans absent any change in such welfare plan coverage), (ii) provide each employee of the Surviving Corporation with credit for any co-payments and deductibles paid prior to the Control Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Control Date, and (iii) provide each employee of the Surviving Corporation with credit for all service with IC and its affiliates under each employee benefit plan, program, or arrangement of CN or its affiliates in which such employees are eligible to participate; provided, however, that in no event shall the employees be entitled to any credit to the extent that it would result in a duplication of benefits with respect to the same period of services. ARTICLE 9 ADDITIONAL AGREEMENTS SECTION 9.01. Preparation of the Form F-4; Proxy or Information Statement; Action by Written Consent. (a) As soon as practicable following the date of this Agreement, IC and CN shall prepare and file with the SEC the Form F-4 pursuant to the Securities Act, which will include the IC proxy or information statement. CN will make all necessary filings with Canadian securities authorities and relevant Canadian stock exchanges with respect to the CN Common Stock to be issued in connection with the Merger. Each of IC and CN shall use its reasonable best efforts to have the Form F-4 declared effective under the Securities Act as promptly as practicable after such filing. IC will use its reasonable best efforts to cause the IC proxy statement or information statement to be mailed to its stockholders as promptly as practicable after consummation of the Offer and effectiveness of the Form F-4 under the Securities Act. CN shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process) 49 55 required to be taken under any applicable state securities laws in connection with the issuance of CN Common Stock pursuant to this Agreement and IC shall furnish all information concerning IC and the holders of IC Common Stock as may be reasonably requested in connection with any such action. No filing of, or amendment or supplement to, the Form F-4 or the proxy or information statement will be made by a party without providing the other party the opportunity to review and comment thereon. CN will advise IC, promptly after it receives notice thereof, of the time when the Form F-4 has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the CN Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or any request by the SEC for additional information. If at any time prior to the Effective Time any information relating to IC or CN, or any of their respective Affiliates, officers or directors, should be discovered by IC or CN which should be set forth in an amendment or supplement to the Form F-4 or the IC proxy or information statement so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of IC and if applicable, the CN. (b) Upon consummation of the Offer and the effectiveness of the Form F-4 and subject to compliance with applicable rules of the NYSE, the parties understand that, pursuant to the Voting Trust Agreement, the trustee of the Voting Trust will effect the approval of the stockholders of IC of the Agreement by taking action by written consent of the stockholders of IC in lieu of calling a meeting of stockholders pursuant to, and in accordance with, the requirements set forth in Section 228 of Delaware Law. SECTION 9.02. Fees and Expenses. (a) Except as set forth in this Section 9.02, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement, and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated. (b) IC agrees to pay CN a fee in immediately available funds equal to $72,000,000 in the following circumstances and at the following times only: (i) concurrently with the termination of this Agreement if this Agreement shall be terminated pursuant to Sections 11.01(d), 11.01(e), 50 56 11.01(f) or 11.01(h) (with respect to a breach of the covenants and agreements set forth in Section 6.03); or (ii) within two business days of the execution of a definitive agreement with respect to any Acquisition Proposal if IC enters into such a definitive agreement within 15 months after the termination of this Agreement pursuant to Section 11.01(c), and an Acquisition Proposal was publicly announced prior to the termination of this Agreement pursuant to Section 11.01(c). SECTION 9.03. Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of IC or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of IC or Merger Subsidiary, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of IC or Merger Subsidiary acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. ARTICLE 10 CONDITIONS TO THE MERGER SECTION 10.01. Conditions to the Obligations of Each Party to the Merger. The obligations of IC, CN and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (a) if required by Delaware Law, this Agreement shall have been adopted by the stockholders of IC at a meeting of the IC stockholders (or by taking action by written consent in lieu of such a meeting) in accordance with such Law; provided that the right to terminate this Agreement pursuant to this Section shall only be available to CN if it has complied with its obligations in Section 7.05; (b) the waiting period under the HSR Act (if any) relating to the Merger shall have expired; and (c) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger. 51 57 SECTION 10.02. Additional Condition to the Obligations of IC. The obligations of IC to consummate the Merger are subject to the satisfaction of the additional condition that the shares of CN Common Stock to be issued in the Merger shall have been approved for listing on the NYSE, subject to official notice of issuance. ARTICLE 11 TERMINATION SECTION 11.01. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any adoption of this Agreement by the stockholders of IC): (a) by mutual written consent of IC and CN; (b) by either IC or CN, if there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining CN or IC from consummating the Merger is entered and such judgment, injunction, order or decree shall become final and nonappealable; (c) by IC or CN, if (i) the Offer shall have expired or been terminated and Merger Subsidiary shall not have purchased shares of IC Common Stock pursuant to the Offer or (ii) Merger Subsidiary shall not have purchased shares of IC Common Stock pursuant to the Offer prior to May 29, 1998; provided, however, that the right to terminate this Agreement pursuant to this Section 11.01(c) shall not be available to any party whose failure to perform any of its obligations under this Agreement (including Merger Subsidiary's failure to purchase shares of IC Common Stock pursuant to the terms and conditions of the Offer) results in the failure of the Offer to be consummated; and provided further that this clause (c) shall not apply if Merger Subsidiary shall have elected to terminate the Offer and proceed with the Merger in accordance with Section 1.04; (d) by CN, prior to the earlier of (x) the consummation of the Offer (if the Offer is consummated) or (y) the adoption of this Agreement by the stockholders of IC, if (i) the Board of Directors of IC shall withdraw, modify or change its recommendation of this Agreement, the Merger or the Offer in a manner adverse to CN, it being understood and agreed that a communication by the Board of Directors of IC to the 52 58 stockholders of IC pursuant to Rule 14d-9(e)(3) of the Exchange Act (or any similar communication to stockholders of IC in connection with the amendment of a tender or exchange offer) shall not be deemed to constitute a withdrawal, modification or change of its recommendation of this Agreement, the Merger or the Offer; (ii) the Board of Directors of IC shall approve or recommend an Acquisition Proposal; or (iii) IC shall have entered into, or shall have publicly announced its intention to enter into, a definitive agreement with respect to an Acquisition Proposal (it being understood and agreed that the delivery of written notice of IC's intention to enter into a definitive agreement with respect to an Acquisition Proposal pursuant to Section 6.03 and any subsequent public announcement of such intention shall not entitle CN to terminate this Agreement pursuant to this paragraph (d) unless IC enters into a definitive agreement with respect to such Acquisition Proposal); (e) by IC, prior to the earlier of (x) the consummation of the Offer or (y) the adoption of this Agreement by the stockholders of IC, if the Board of Directors of IC shall have entered into or shall have publicly announced its intention to enter into, a definitive agreement with respect to an Acquisition Proposal, if the Board of Directors concludes in good faith, based on the advice of outside counsel, that such action is reasonably necessary in order for the Board of Directors to act in a manner consistent with the Board's fiduciary duties under applicable law; provided, that the right to terminate this Agreement pursuant to this Section 11.01(e) shall not be available to IC unless (x) IC has complied in all material respects with its obligations in Section 6.03 of this Agreement and (y) concurrently with such termination, IC enters into a definitive agreement to effect the Acquisition Proposal referred to herein and complies with its obligations under Section 9.02(b); (f) by CN, prior to the earlier of (x) consummation of the Offer (if the Offer is consummated) or (y) the adoption of this Agreement by the stockholders of IC, if any person or group (as defined in Section 13(d)(3) of the Exchange Act) (other than CN, any CN Subsidiary, or an Affiliate thereof) shall have become the beneficial owner (as defined under Rule 13d-3 promulgated under the Exchange Act) of at least 40% of the outstanding shares of IC Common Stock; (g) by IC, prior to the earlier of (x) consummation of the Offer or (y) the adoption of this Agreement by the stockholders of IC, if CN or Merger Subsidiary shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to 53 59 perform (i) would give rise to the failure of the conditions set forth in Article 10 and (ii) either is not reasonably capable of being cured or, if it is reasonably capable of being cured, has not been cured within the earlier of (x) 10 days after giving of written notice to CN of such breach or (y) the expiration of the Offer (if applicable) (provided that IC shall not have the right to terminate the Agreement if IC is then in breach of its representations, warranties, covenants or other agreements contained in this Agreement); (h) by CN, prior to the earlier of (x) consummation of the Offer (if the Offer is consummated) or (y) the adoption of this Agreement by the stockholders of IC, if IC shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would give rise to the failure of the conditions set forth in Article 10 and (ii) either is not reasonably capable of being cured or, if it is reasonably capable of being cured, has not been cured within the earlier of (x) 10 days after giving of written notice to IC of such breach or (y) the expiration of the Offer (if applicable) (provided that CN shall not have the right to terminate the Agreement if CN (or Merger Subsidiary) is then in breach of its representations, warranties, covenants or other agreements contained in this Agreement); and (i) by CN or IC if, during any five consecutive trading day period during the period from the commencement of the Offer until the business day prior to the expiration of the Offer the average closing price of the CN Common Stock on the NYSE is less than $38.00; provided that any exercise of the right to terminate pursuant to this Section 11.01(i) with respect to any five consecutive trading day period shall only be effective if notice of such termination is given to the other party prior to the earlier of (i) 72 hours after the close of trading on the fifth such consecutive day and (ii) the expiration date of the Offer. The party desiring to terminate this Agreement shall give written notice of such termination to the other party in accordance with Section 12.01. SECTION 11.02. Effect of Termination. If this Agreement is terminated pursuant to Section 11.01, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except that (i) the agreements contained in Sections 4.18, 5.16, 9.02, 11.02 and 12.03 and (ii) the prohibition regarding a waiver or change of the condition in paragraph (e) of Annex 1 that is set forth in Section 1.01(a)(iv) shall survive the termination hereof. 54 60 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to CN or Merger Subsidiary, to: Jean Pierre Ouellet, Esq. Canadian National Railway Company 935, rue de la Gauchetiere Ouest Montreal, (Quebec) Canada Telecopy: (514) 399-3779 with a copies to: Winthrop B. Conrad, Jr., Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telecopy: (212) 450-4800 if to IC, to: Ronald A. Lane, Esq. Illinois Central Corporation 455 North Cityfront Plaza Drive Chicago, Illinois 60611-5504 Telecopy: (312) 755-7669 with a copy to: John G. Finley, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Telecopy: (212) 455-2502 or such other address or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the 55 61 appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section. SECTION 12.02. Definitions. (a) For purposes of this Agreement: "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "BENEFIT ARRANGEMENT" means any employment, severance or similar contract or arrangement (whether or not written) or any plan, policy, fund, program or contract or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock option, or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, workers' compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that (i) is not an Employee Plan, (ii) is entered into, maintained, administered or contributed to, by IC or any of its ERISA Affiliates or by CN or any of its ERISA Affiliates, as applicable and (iii) covers any employee or former employee of IC or any IC Subsidiary or of CN or any CN Subsidiary, as applicable. "CONTINUING DIRECTORS" means the directors of IC then in office who are neither designated or employed by or otherwise affiliated with CN nor are employees of IC. "CONTROL DATE" means the date on which CN is lawfully permitted to assume control over IC's railroad operations pursuant to STB approval or exemption. "EMPLOYEE PLAN" means any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or contributed to by IC or any of its ERISA Affiliates, or by CN or any of its ERISA Affiliates, as applicable and (iii) covers any employee or former employee of IC or any IC Subsidiary or of CN or any CN Subsidiary, as applicable. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder. "ERISA AFFILIATE" of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code. 56 62 "MATERIAL ADVERSE EFFECT" means, with respect to either CN or IC, a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of such Person and its Subsidiaries, taken as a whole, other than, with respect to any representation or warranty made (or deemed to be made) by such Person, as a result of changes in conditions, including economic, regulatory or political developments, applicable to the United States or Canadian railway industry generally. "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 3(37) of ERISA, which is subject to Section 4022A of ERISA. "PBGC" means the Pension Benefit Guaranty Corporation. "PERSON" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including, without limitation, a government or political subdivision or any agency or instrumentality thereof. "SUBSIDIARY", when used with respect to any Person means any other Person, whether incorporated or unincorporated, of which securities or other ownership interests having ordinary power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries. "TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA other than any Multiemployer Plan. (b) Each of the following definitions appears on the page set forth opposite the definition:
Agreement................................................................. 1 Acquisition Proposal...................................................... 39 Affiliate................................................................. 57 Benefit Arrangement....................................................... 57 IC........................................................................ 1 IC 10-K................................................................... 16 IC 10-Q................................................................... 16 IC Balance Sheet.......................................................... 17 IC Balance Sheet Date..................................................... 17 IC Common Stock........................................................... 1 IC Disclosure Documents................................................... 17 IC Environmental Permits.................................................. 25 IC Options................................................................ 10
57 63
IC SEC Filings............................................................ 16 IC Securities............................................................. 15 IC Subsidiary Securities.................................................. 16 CN........................................................................ 1 CN 6-K.................................................................... 28 CN 40-F................................................................... 27 CN Average Closing Price.................................................. 7 CN Average Price.......................................................... 10 CN Balance Sheet.......................................................... 29 CN Balance Sheet Date..................................................... 29 CN Class A Preferred Stock................................................ 27 CN Class B Preferred Stock................................................ 27 CN Common Stock........................................................... 7 CN Disclosure Documents................................................... 29 CN Options................................................................ 10 CN SEC Filings............................................................ 28 CN Securities............................................................. 27 CN Subsidiary Securities.................................................. 28 Code...................................................................... 10 Confidentiality Agreement................................................. 39 Control Date.............................................................. 57 Covered Employees......................................................... 48 Delaware Law.............................................................. 3 Effective Time............................................................ 6 Employee Plan............................................................. 57 Environmental Laws........................................................ 25 ERISA..................................................................... 57 ERISA Affiliate........................................................... 57 Excess Shares............................................................. 10 Exchange Act.............................................................. 14 Exchange Agent............................................................ 8 Exchange Ratio............................................................ 7 Excise Taxes.............................................................. 48 Form F-4.................................................................. 29 Gross-Up Payment.......................................................... 48 Hazardous Substances...................................................... 25 HSR Act................................................................... 3 Investment Commitment Agreements.......................................... 1 LTIP...................................................................... 47 Lien...................................................................... 15 Material Adverse Effect................................................... 58 Merger.................................................................... 6 Merger Consideration...................................................... 7 Merger Subsidiary......................................................... 1
58 64
Minimum Condition......................................................... 2 Multiemployer Plan........................................................ 58 1998 Bonuses.............................................................. 47 1998 Options.............................................................. 47 NYSE...................................................................... 7 Offer..................................................................... 2 Offer Documents........................................................... 3 Options................................................................... 10 PBGC...................................................................... 58 Performance Programs...................................................... 47 Person.................................................................... 58 Principal CN Subsidiary................................................... 27 Railroad Subsidiaries................................................ Recitals Real Estate Reorganization................................................ 30 Reciprocal Stock Proration Factor......................................... 11 Retention Bonuses......................................................... 47 Rights Plan............................................................... 35 Schedule 14D-9............................................................ 4 SEC....................................................................... 3 Securities Act............................................................ 12 Security Agreements....................................................... 48 Service Agent............................................................. 63 STB....................................................................... 4 Stock Number.............................................................. 7 Stock Proration Factor.................................................... 7 Subsidiary................................................................ 58 Surviving Corporation..................................................... 6 Takedown.................................................................. 46 Title IV Plan............................................................. 58 Unvested 2000 Options..................................................... 47 Voting Trust.............................................................. 4 Voting Trust Agreement.................................................... 4
SECTION 12.03. Survival. Subject to Section 11.02, the representations and warranties and agreements contained herein and in any certificate or other writing delivered pursuant hereto shall terminate at the Effective Time or upon the termination of this Agreement, except that the covenants and agreements of IC contained in Sections 6.01 and 6.02 and the covenants and agreements of CN contained in Sections 7.06, 8.01, 8.02, 8.03, 8.07 and 9.03 shall survive the Effective Time and shall remain in full force and effect in accordance with their terms. 59 65 SECTION 12.04. Amendments; No Waivers; Continuing Directors. (a) Before or after adoption of this Agreement by the stockholders of IC, any provision of this Agreement may be amended or waived prior to the Control Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the adoption of this Agreement by the stockholders of IC, there shall not be made any amendment that by law requires further approval by the stockholders of IC without the further approval of such stockholders and, provided, further, that no such amendment of this Agreement, the Voting Trust Agreement or any other agreement entered into in connection with this Agreement shall be effected after the closing of the Offer and prior to the Control Date unless there are then in office two or more Continuing Directors and such amendment is approved by a majority of such Continuing Directors, it being understood and agreed that IC and the Board of Directors of IC shall use reasonable best efforts to ensure that, at all times prior to the Control Date, at least two Continuing Directors remain in office. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (c) Following consummation of the Offer and prior to the Control Date, any amendment to the certificate of incorporation or by-laws of IC or to this Agreement or to the Voting Trust Agreement, any termination by IC or by IC and CN pursuant to Section 11.01(a) of this Agreement, any waiver of any of IC's rights hereunder (including any waiver or consent required under Section 1.03 hereof), and any other consent or action by the Board of Directors of IC hereunder, shall not be effected unless there are then in office two or more Continuing Directors and such approval is approved by a majority of such Continuing Directors, it being understood and agreed that IC and the Board of Directors of IC shall use commercially reasonable best efforts to ensure that, at all times prior to the Control Date, at least two Continuing Directors remain in office. SECTION 12.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto except that Merger Subsidiary may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase shares of IC Common Stock pursuant to the Offer but any such transfer or assignment will not relieve Merger Subsidiary of its 60 66 obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for shares validly tendered and accepted for payment pursuant to the Offer. SECTION 12.06. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 12.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 12.08. Entire Agreement; No Third Party Beneficiaries. (a) This Agreement and the agreements referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than the Confidentiality Agreement, which shall survive the execution and delivery of this Agreement. (b) This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 7.06 (which is intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons), it being understood and agreed that (i) if any such Person shall institute and prevail in any proceedings against CN in respect of a breach by CN of its covenants and agreements contained in Section 7.06 hereof, CN shall pay the reasonable expenses of such Person (including attorney's fees) incurred in connection with such proceeding to the fullest extent authorized by applicable law and (ii) if any such Person shall institute any proceedings against CN in respect of a breach by CN of its covenants and agreements contained in Section 7.06 hereof where the circumstances underlying the claim for indemnification arose during the period from the date hereof through the Control Date, CN shall be obligated to advance to such Person the reasonable expenses of such Person (including attorney's fees) incurred in connection with such proceeding as such expenses are incurred subject to the obligation of such Person to reimburse such expenses to the CN if such Person does not prevail in such proceedings. 61 67 SECTION 12.09. Submission to Jurisdiction; Waivers. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by the other party hereto or its successors or assigns shall be brought and determined in any federal court located in the State of Delaware or the Chancery or other Courts of the State of Delaware, and each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) the defense of sovereign immunity, (b) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to serve process in accordance with this Section 12.09, (c) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (d) to the fullest extent permitted by applicable law, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Each of the parties hereto further covenants and agrees that each such party shall maintain a duly appointed agent for the service of summonses and other legal processes in the State of Delaware (a "SERVICE AGENT"), unless such party is organized under the laws of the State of Delaware or qualified to do business in the State of Delaware, and will notify the other parties hereto of the name and address of such Service Agent. SECTION 12.10. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. SECTION 12.11. Guarantee of Merger Subsidiary. CN unconditionally and irrevocably guarantees the performance by Merger Subsidiary of its obligations set forth in this Agreement. SECTION 12.12. Disclosure Schedules. IC and CN agree that, for purposes of the representations and warranties of such parties in this Agreement, any item disclosed in a Schedule shall be deemed to be disclosed in all other Schedules in which the disclosure of such item would be considered responsive. 62 68 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. Canadian National Railway Company By: /s/ PAUL TELLIER -------------------------------- Name: Paul Tellier Title: President and Chief Executive Officer Blackhawk Merger Sub, Inc. By: JEAN PIERRE OUELLET -------------------------------- Name: Jean Pierre Ouellet Title: President and Director Illinois Central Corporation By: GILBERT H. LAMPHERE -------------------------------- Name: Gilbert H. Lamphere Title: Chairman 69 ANNEX I Notwithstanding any other provision of the Offer, CN and Merger Subsidiary shall not be required to accept for payment or pay for any shares of IC Common Stock, and may terminate the Offer, if (i) by the expiration of the Offer less than 50.1% of the outstanding shares of IC Common Stock (on a fully diluted basis) have been tendered pursuant to the Offer and not withdrawn, (ii) the applicable waiting period (if any) under the HSR Act shall not have expired or been terminated, (iii) the staff of the STB shall not have given CN a favorable informal advisory opinion to the effect that the proposed use of the Voting Trust will preclude unlawful control of IC by CN or (iv) at any time on or after February 10, 1998, and prior to the acceptance for payment of shares, any of the following conditions exist: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the making of the Offer, challenging or seeking to make illegal the Voting Trust, the acceptance for payment of or payment for some of or all the shares of IC Common Stock by CN or the consummation of the Merger, seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Offer or the Merger (including the Voting Trust), (ii) except for the Voting Trust, seeking to restrain or prohibit CN's ownership or operation (or that of its respective Subsidiaries or Affiliates) of all or any material portion of the business or assets of IC and its Subsidiaries, taken as a whole, or of CN and its Subsidiaries, taken as a whole, or to compel CN or any of its Subsidiaries or Affiliates to dispose of or hold separate all or any material portion of the business or assets of IC and its Subsidiaries, taken as a whole, or of CN and its Subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking to impose or confirm material limitations on the ability of CN or any of its Subsidiaries or Affiliates effectively to exercise full rights of ownership of the IC Common Stock , including, without limitation, the right to vote any shares of such stock acquired or owned by CN or any of its Subsidiaries or Affiliates on all matters properly presented to the stockholders of IC, or (iv) seeking to require divestiture by CN or any of its Subsidiaries or Affiliates of any such shares; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Offer or the Merger (including the Voting Trust), by any court, government or governmental authority or agency, domestic or foreign (other than (i) the application of the waiting period provisions of the HSR Act to 70 the Offer or the Merger and (ii) the waiting period prior to receipt of STB approval or exemption with respect to the exercise of control by CN over the Railroad Subsidiaries), would reasonably be likely, directly or indirectly, to result in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; or (c) any change shall have occurred or been threatened (or any development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of IC or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect with respect to IC, or (d) IC shall have breached or failed to perform in any material respect any of its covenants or agreements under the Merger Agreement, or any of the representations and warranties of IC set forth in the Merger Agreement shall not be true in any material respect when made or at any time prior to consummation of the Offer as if made at and as of such time (unless such representation or warranty is made only as of a specific date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality or "material adverse effect") does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or (e) the Merger Agreement shall have been terminated in accordance with its terms; which, in the sole judgment of CN in any such case, and regardless of the circumstances (including any action or omission by CN) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. 2 71 EXHIBIT A [Form of Voting Trust Agreement] 72 EXHIBIT A THIS VOTING TRUST AGREEMENT, dated as of [_________ ___], 1998, by and among Canadian National Railway Company, a Canadian corporation ("PARENT"), Blackhawk Merger Sub, Inc. a Delaware corporation and an indirect wholly owned subsidiary of Parent ("MERGER SUBSIDIARY") and [______________], a [____________] [corporation] (the "TRUSTEE"), W I T N E S S E T H: WHEREAS, it is intended that Merger Subsidiary will commence and complete a cash tender offer (the "OFFER") for up to an aggregate of [ ] outstanding shares of common stock ("SHARES") of Illinois Central Corporation, a Delaware corporation (the "COMPANY") to be followed by a merger of Merger Subsidiary with and into the Company (the "MERGER") pursuant to, and upon the terms and conditions set forth in, the Agreement and Plan of Merger dated as of February 10, 1998 among the Company, Parent and Merger Subsidiary, as it may be amended from time to time (the "MERGER AGREEMENT") (a copy of which is attached hereto as Exhibit A); WHEREAS, it is intended that the consummation of the Merger will occur prior to any issuance by the Surface Transportation Board (the "STB") of any required approval for, or exemption of, Parent's control of the Company; WHEREAS, Parent and Merger Subsidiary intend, simultaneously with the acquisition of the Shares of the Company pursuant to the Offer and pursuant to the Merger (the corporation surviving the Merger also referred to herein as the "COMPANY"), to cause the deposit of such shares in an independent, irrevocable voting trust, pursuant to the rules of the STB, in order to avoid any allegation or assertion that Parent or any of its affiliates is controlling or has the power to control the Company prior to the receipt of any required STB approval or exemption; WHEREAS, neither the Trustee nor any of its affiliates has any officers or board members in common or any direct or indirect business arrangements or dealings (as described in Paragraph 9 hereof) with Parent or any of its affiliates; and 73 WHEREAS, the Trustee is willing to act as voting trustee pursuant to the terms of this Trust Agreement and the rules of the STB, NOW, THEREFORE, the parties hereto agree as follows: 1. Parent and Merger Subsidiary hereby appoint [________________] as Trustee hereunder, and [_____________] hereby accepts said appointment and agrees to act as Trustee under this Trust Agreement as provided herein. 2. Parent and Merger Subsidiary agree that, prior to acceptance of any tendered Shares pursuant to the Offer, Merger Subsidiary will direct the depositary for the offer to transfer to the Trustee any Shares accepted for payment pursuant to the Offer. Parent and Merger Subsidiary also agree that immediately upon receipt, acquisition or purchase by either of them or by any of their affiliates of any additional Shares, or any other voting securities of the Company, it will transfer or cause to be transferred to the Trustee the certificate or certificates representing such additional Shares or other securities. Parent also agrees that, simultaneously with the effectiveness of the Merger, Parent will cause the transfer to the Trustee of the certificate or certificates representing 100 percent of the issued and outstanding shares of the Company, as the corporation surviving the Merger. All such certificates shall be duly endorsed or accompanied by proper instruments duly executed for transfer thereof to the Trustee, and shall be exchanged for one or more Voting Trust Certificates substantially in the form attached hereto as Attachment A (the "TRUST CERTIFICATES"), with the blanks therein appropriately filled. All Shares at any time delivered to the Trustee hereunder are hereinafter called the "COMPANY TRUST STOCK." The Trustee shall present to the Company all certificates representing Company Trust Stock for surrender and cancellation and for the issuance and delivery to the Trustee of new certificates (the "TRUST STOCK") registered in the name of the Trustee or its nominee. 3. The Trustee shall be present, in person or represented by proxy, at all annual and special meetings of shareholders of the Company so that all Trust Stock may be counted for the purposes of determining the presence of a quorum at such meetings. The Trustee shall be entitled and it shall be its duty to exercise any and all voting rights in respect of the Trust Stock either in person or by proxy or consent, as hereinafter provided, unless otherwise directed by an order of the STB or a court of competent jurisdiction. Parent and Merger Subsidiary agree, and the Trustee acknowledges, that the Trustee shall not participate in or interfere with the management of the Company and shall take no other actions with respect to the Company except in accordance with the terms hereof. The Trustee shall exercise all voting rights in respect of the Trust Stock in favor of any proposal or action necessary or desirable to effect, or consistent with the effectuation of, the 2 74 acquisition of the Company by Parent and Merger Subsidiary pursuant to the Merger Agreement and, without limiting the generality of the foregoing, if there shall be with respect to the Board of Directors of the Company an "ELECTION CONTEST" as defined in the Proxy Rules of the Securities and Exchange Commission (the "SEC"), in which one slate of nominees shall support the effectuation of the Merger and another oppose it, in favor of the slate supporting the effectuation of the Merger. In addition, for so long as the Merger Agreement is in effect, the Trustee shall vote all shares of Trust Stock to cause any other proposed merger, business combination or similar transaction (including, without limitation, any consolidation, sale of all or substantially all the assets, reorganization, recapitalization, liquidation or winding up of or by the Company) involving the Company, but not involving Parent or one of its affiliates (other than in connection with a disposition pursuant to paragraph 8), not to be effected. The Trustee shall vote all shares of Trust Stock in favor of any proposal or action necessary or desirable to dispose of Trust Stock in accordance with Paragraph 8 hereof. Except as otherwise expressly provided in the three immediately preceding sentences, the Trustee shall vote all shares of Trust Stock with respect to all matters, including, without limitation, the election or removal of directors, voted on by the shareholders of the Company (whether at a regular or special meeting or pursuant to a unanimous written consent) in the Trustee's sole discretion, having due regard for the interests of the holders of the Trust Certificates as investors in the Company, determined without reference to such holders' interests in railroads other than the Company or its subsidiaries; provided that the Trustee shall not vote the Trust Stock in favor of taking or doing any act which would violate any provision of the Merger Agreement or impede the Company's performance thereunder or which if taken or done prior to the consummation of the Merger would have been a violation of the Merger Agreement. Notwithstanding the foregoing provisions of this Paragraph 3 or any other provision of this Agreement, the registered holder of a Trust Certificate may at any time -- but only with the prior written approval of the STB -- instruct the Trustee in writing to vote the Trust Stock represented by such Trust Certificate in any manner, in which case the Trustee shall vote such shares in accordance with such instructions. In exercising its voting rights in accordance with this Paragraph 3, the Trustee shall take such actions at all annual, special or other meetings of stockholders of the Company or in connection with any action by consent in lieu of a meeting. 4. This Trust Agreement and the nomination of the Trustee during the term of the trust shall be irrevocable by Parent and its affiliates and shall terminate only in accordance with the provisions of Paragraphs 8 and 14 hereof. 5. Subject to Paragraph 3, the Trustee shall not exercise the voting powers of the Trust Stock in any way so as to create any dependence or 75 intercorporate relationship between (i) Parent and its affiliates, on the one hand, and (ii) the Company or its affiliates, on the other hand. The term "AFFILIATE" or "AFFILIATES" wherever used in this Trust Agreement shall have the meaning specified in Section 11323(c) of Title 49 of the United States Code, as amended. The Trustee shall not, without the prior approval of the STB, vote the Trust Stock to elect any officer, director, nominee or representative of Parent or any of its affiliates as an officer or director of the Company or of any affiliate of the Company. The Trustee shall be kept informed respecting the business operations of the Company by means of the financial statements and other public disclosure documents periodically filed by the Company and affiliates of the Company with the SEC and with the STB, and by means of information respecting the Company contained in such statements and other documents filed by Parent with the SEC and the STB, copies of which shall be promptly furnished to the Trustee by the Company or Parent, as the case may be, and the Trustee shall be fully protected in relying upon such information. The Trustee shall not be liable for any mistakes of fact or law or any error of judgment, or for any act or omission, except as a result of the Trustee's willful misconduct or gross negligence. 6. All Trust Certificates shall be transferable on the books of the Trustee by the registered holder upon the surrender thereof properly assigned, in accordance with rules from time to time established for the purpose by the Trustee. Until so transferred, the Trustee may treat the registered holder as owner for all purposes. Each transferee of a Trust Certificate issued hereunder shall, by his acceptance thereof, assent to and become a party to this Trust Agreement, and shall assume all attendant rights and obligations. 7. Pending the termination of this Trust as hereinafter provided, the Trustee shall, immediately following the receipt of each cash dividend or cash distribution as may be declared and paid upon the Trust Stock, pay the same over to or as directed by the registered holder(s) of Trust Certificates hereunder as then known to the Trustee. The Trustee shall receive and hold dividends and distributions other than cash upon the same terms and conditions as the Trust Stock and shall issue Trust Certificates representing any new or additional securities that may be paid as dividends upon the Trust Stock or otherwise distributed upon the Trust Stock to the registered holder(s) of Trust Certificates in proportion to their respective interests. 8. (a) This Trust is accepted by the Trustee subject to the right hereby reserved in Parent at any time to sell or make any other disposition of the whole or any part of the Trust Stock, whether or not an event described in subparagraph (b) below has occurred. The Trustee shall take all actions reasonably requested by Parent with respect to (including, without limitation, exercising all voting rights in respect of Trust Stock in favor of any proposal or action necessary or desirable to 76 effect, or consistent with the effectuation of) any proposed sale or other disposition of the whole or any part of the Trust Stock by Parent. The Trustee shall at any time upon the receipt of a direction from Parent signed by its President or one of its Vice Presidents and under its corporate seal designating the person or entity to whom Parent has directly or indirectly sold or otherwise disposed of the whole or any part of the Trust Stock and certifying that such person or entity is not an affiliate of Parent and has all necessary regulatory authority, if any be required, to purchase the Trust Stock (upon which certification the Trustee shall be entitled to rely), immediately transfer to the person or entity therein named all the Trustee's right, title and interest in such amount of the Trust Stock as may be set forth in said direction. If the foregoing direction shall specify all of the Trust Stock, then following transfer of the Trustee's right, title and interest therein, and in the event of a sale thereof, upon delivery to or upon the order of the registered holder(s) of the Trust Certificates of the proceeds of such sale, this Trust shall cease and come to an end. If the foregoing direction is as to only a part of the Trust Stock, then this Trust shall cease as to said part upon such transfer, and distribution of the net proceeds therefrom in the event of sale, but shall remain in full force and effect as to the remaining part of the Trust Stock. In the event of a direct or indirect sale of Trust Stock by Parent, the Trustee shall, to the extent the consideration therefor is payable to or controllable by the Trustee, promptly pay, or cause to be paid upon the order of Parent the net proceeds of such sale on a pro rata basis to the registered holder(s) of the Trust Certificates. It is the intention of this paragraph that no violations of 49 U.S.C. section 11323 will result from a termination of this Trust. (b) In the event the STB Approval (as defined below) shall have been granted, then immediately upon the direction of Parent and the delivery of a certified copy of such order of the STB or other governmental authority with respect thereof, or, in the event that Subtitle IV of Title 49 of the United States Code, or other controlling law, is amended to allow Parent or its affiliates to acquire control of the Company without obtaining STB or other governmental approval, upon delivery of an opinion of independent counsel selected by the Trustee that no order of the STB or other governmental authority is required, the Trustee shall either (i) transfer to or upon the order of the registered holder(s) of Trust Certificates hereunder as then known to the Trustee, its right, title and interest in and to all of the Trust Stock then held by it in accordance with the terms, conditions and agreements of this Trust Agreement and not theretofore transferred by it as provided in subparagraph (a) hereof, or (ii) if shareholder approval of the Merger has not previously been obtained, vote the Trust Stock with respect to the Merger or any other merger between the Company and Merger Subsidiary or any other affiliate of Parent as directed by the registered holder(s) of the Trust Certificates; and 5 77 upon any such transfer or merger this Trust shall cease and come to an end. (c) In the event that there shall have been an STB Denial (as defined below), Parent shall use its best efforts to sell the Trust Stock to one or more eligible purchasers, or otherwise to dispose of the Trust Stock, during a period of two years after such STB Denial or such extension of that period as the STB shall approve. Any such disposition shall be subject to any jurisdiction of the STB to oversee Parent's divestiture of Trust Stock. At all times, the Trustee shall continue to perform its duties under this Trust Agreement and, should Parent be unsuccessful in its efforts to sell or distribute the Trust Stock during the period referred to, the Trustee shall as soon as practicable sell the Trust Stock for cash to one or more eligible purchasers in such manner and for such price as the Trustee in its discretion shall deem reasonable after consultation with the Parent. (An "ELIGIBLE PURCHASER" hereunder shall be a person or entity that is not affiliated with the Parent and which has all necessary regulatory authority, if any be required, to purchase the Trust Stock.) Parent agrees to cooperate with the Trustee in effecting such disposition, and the Trustee agrees to act in accordance with any direction made by Parent as to any specific terms or method of disposition, to the extent not inconsistent with the requirements of the terms of any STB or court order. The proceeds of the sale shall be distributed on a pro rata basis to or upon the order of the registered holder(s) of the Trust Certificates hereunder as then known to the Trustee. The Trustee may, in its reasonable discretion, require the surrender to it of the Trust Certificates hereunder before paying to the holder his share of the proceeds. Upon disposition of the Trust Stock pursuant to this Paragraph 8(c), this Trust shall cease and come to an end. (d) Unless sooner terminated pursuant to any other provision herein contained, this Trust Agreement shall terminate on ______________ ___, [2003], and may be extended by the parties hereto, so long as no violation of 49 U.S.C. section 11323 will result from such termination or extension. All Trust Stock and any other property held by the Trustee hereunder upon such termination shall be distributed on a pro rata basis to or upon the order of the registered holder(s) of Trust Certificates hereunder as then known to the Trustee. The Trustee may, in its reasonable discretion, require the surrender to it of the Trust Certificates hereunder before the release or transfer of the stock interests evidenced thereby. (e) The Trustee shall promptly inform the STB of any transfer or disposition of Trust Stock pursuant to this Paragraph 8. (f) Except as provided in this Paragraph 8, the Trustee shall not dispose of, or in any way encumber, the Trust Stock. 6 78 (g) Notwithstanding the foregoing, if the STB issues a declaratory order that the termination of the Trust will not cause Parent or its affiliates to have control of the Company, the Trustee shall transfer on a pro rata basis to or upon the order of the registered holder(s) of Trust Certificates hereunder as then known to the Trustee, its right, title and interest in and to all of the Trust Stock then held by it in accordance with the terms and conditions of this Trust Agreement and not theretofore transferred by it as provided in subparagraph (a) hereof, and this Trust shall cease and come to an end. The Trustee may, in its reasonable discretion, require the surrender to it of the Trust Certificates hereunder before the release or transfer of the stock interests evidenced thereby. (h) As used in this Paragraph 8, the terms "STB APPROVAL" and "STB DENIAL" shall have the following meanings: "STB APPROVAL" means the issuance by the STB of a decision, which decision shall become effective and which decision shall not have been stayed or enjoined, that (A) constitutes a final agency action approving, exempting or otherwise authorizing the acquisition of control over the Company's railroad operations by Parent and its affiliates, without the imposition of conditions that Parent, by written notice to the Trustee, has deemed to be unacceptable, and (B) does not require any change in the consideration paid or to be paid pursuant to the Merger Agreement or other material provisions thereof, unless Parent, by written notice to the Trustee, has determined any such change to be acceptable to Parent. "STB DENIAL" means (i) STB Approval shall not have been obtained by December 31, [2000] or (ii) the STB shall have, by an order which shall have become final and no longer subject to review by the courts, refused to approve the control referred to in clause (A) of the definition of STB Approval. 9. Neither the Trustee nor any affiliate of the Trustee may have (i) any officers, or members of their respective boards or directors, in common with Parent or any of its affiliates, or (ii) any direct or indirect business arrangements or dealings, financial or otherwise, with Parent or any of its affiliates, other than dealings pertaining to establishment and carrying out of this Trust. Mere investment in the stock or securities of Parent or any of its affiliates by the Trustee, short of obtaining a controlling interest, will not be considered a proscribed business arrangement or dealing, but in no event shall any such investment by the Trustee in voting securities of Parent or its affiliates exceed 5 percent of their outstanding voting securities; and in no event shall the Trustee hold a proportion of such voting securities so substantial as to permit the Trustee in any way to control or direct the affairs of Parent or its affiliates. Neither Parent nor its affiliates shall purchase the stock or securities of the Trustee or any affiliate of the Trustee. 7 79 10. The Trustee shall be entitled to receive reasonable and customary compensation for all services rendered by it as Trustee under the terms hereof, and said compensation to the Trustee, together with all counsel fees, taxes, or other expenses reasonably incurred hereunder, shall be promptly paid by Parent. 11. The Trustee may at any time or from time to time appoint an agent or agents and may delegate to such agent or agents the performance of any administrative duty of the Trustee and be entitled to reimbursement for the fees and expenses of such agents. 12. The Trustee shall not be answerable for the default or misconduct of any agent or attorney appointed by it in pursuance hereof if such agent or attorney shall have been selected with reasonable care. The duties and responsibilities of the Trustee shall be limited to those expressly set forth in this Trust Agreement. The Trustee shall be fully protected by acting in reliance upon any notice, advice, direction or other document or signature believed by the Trustee to be genuine. The Trustee shall not be responsible for the sufficiency or accuracy of the form, execution, validity or genuineness of the Trust Stock, or of any other documents, or of any endorsement thereon, or for any lack of endorsement thereon, or for any description therein, nor shall the Trustee be responsible or liable in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any such Trust Stock or other document or endorsement or this Trust Agreement, except for the execution and delivery of this Trust Agreement by this Trustee. The Parent agrees that it will at all times protect, indemnify and save harmless the Trustee from any loss, damages, liability, cost or expense of any kind or character whatsoever in connection with this Trust, except those, if any, resulting from the gross negligence or willful misconduct of the Trustee, and will at all times undertake, assume full responsibility for, and pay on a current basis, but at least quarterly, all cost and expense of any suit or litigation of any character, whether or not involving a third party, including any proceedings before the STB, with respect to the Trust Stock or this Trust Agreement, and if the Trustee shall be made a party thereto, or be the subject of any investigation or proceeding (whether formal or informal), the Parent will pay all costs, damages and expenses, including reasonable counsel fees, to which the Trustee may be subject by reason thereof; provided, however, that Parent shall not be responsible for the cost and expense of any suit that the Trustee shall settle without first obtaining Parent's written consent. The indemnification obligations of Parent shall survive any termination of this Trust Agreement or the removal, resignation or other replacement of the Trustee. The Trustee may consult with counsel selected by it and the opinion of such counsel shall be full and complete authorization and protection in respect of any action 8 80 taken or omitted or suffered by the Trustee hereunder in good faith and in accordance with such opinion. 13. To the extent requested to do so by Parent, Merger Subsidiary or any registered holder of a Trust Certificate, the Trustee shall furnish to the party making such request full information with respect to (i) all property theretofore delivered to it as Trustee, (ii) all property then held by it as Trustee, and (iii) all action theretofore taken by it as Trustee. 14. The Trustee, or any trustee hereafter appointed, may at any time resign by giving sixty days' written notice of resignation to Parent, Merger Subsidiary and the STB. Parent shall at least fifteen days prior to the effective date of such notice appoint a successor trustee which shall (i) satisfy the requirements of Paragraph 9 hereof and (ii) be a corporation organized and doing business under the laws of the United States or of any State thereof and authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority. If no successor trustee shall have been appointed and shall have accepted appointment at least fifteen days prior to the effective date of such notice of resignation, the resigning Trustee may petition any authority or court of competent jurisdiction for the appointment of a successor trustee. Upon written assumption by the successor trustee of the Trustee=s powers and duties hereunder a copy of the assumption shall be delivered by the Trustee to Parent and to Merger Subsidiary, and the STB and all registered holders of Trust Certificates shall be notified of such assumption, whereupon the Trustee shall be discharged of its powers and duties hereunder and the successor trustee shall become vested therewith. In the event of any material violation by the Trustee of the terms and conditions of this Trust Agreement, the Trustee shall become disqualified from acting as trustee hereunder as soon as a successor trustee shall have been selected in the manner provided by this paragraph. 15. This Trust Agreement may from time to time be modified or amended by agreement executed by the Trustee, Parent, (prior to the Merger) Merger Subsidiary and the registered holder(s) of the Trust Certificates (i) pursuant to an order of the STB, (ii) with the prior approval of the STB, (iii) in order to comply with any order of the STB, or (iv) upon receipt of an opinion of counsel satisfactory to the Trustee and the registered holder(s) of Trust Certificates that an order of the STB approving such modification or amendment is not required and that the amendment is authorized under the Merger Agreement and is consistent with the regulations of the STB regarding voting trusts. 16. The provisions of this Trust Agreement and the rights and obligations of the parties hereunder shall be governed by the laws of the State of 81 Delaware, except that, to the extent any provision hereof may be found inconsistent with the ICC Termination Act of 1995 or regulation promulgated thereunder by the STB, such Act and regulations shall control and such provision hereof shall be given effect only to the extent permitted by such Act and regulations. In the event that the STB shall, at any time hereafter by final order, find that compliance with law requires any other or different action by the Trustee than is provided herein, the Trustee shall act in accordance with such final order instead of the provisions of this Trust Agreement. 17. This Trust Agreement is executed in three counterparts, each of which shall constitute an original, and one of which shall be retained by Parent, one by Merger Subsidiary, and the other by the Trustee. 18. A copy of this Agreement and any amendments or modifications thereto shall be filed with the STB by Parent. 19. This Trust Agreement shall be binding upon the successors and assigns to the parties hereto, including without limitation successors to Parent by merger, consolidation or otherwise. 20. For purposes of this Trust Agreement, the term "SURFACE TRANSPORTATION BOARD" or "STB", includes any successor agency or governmental department that is authorized to carry out the responsibilities now carried out by the STB with respect to voting trusts and control of common carriers. 21. (a) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by U.S. mail, certified mail, return receipt requested or by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy) against receipt to the party to whom it is to be given at the address of such party set forth below (or to such other address as the party shall have given notice of): To the Trustee: [______________________] [Address] Attention: [Title] To Parent and (prior to the Merger) Merger Subsidiary: Canadian National Railway Company [Address] Attention: [Title] 82 (b) Unless otherwise specifically provided herein, any notice to or communication with the registered holder(s) of the Trust Certificates hereunder shall be deemed to be sufficiently given or made if enclosed in postpaid envelopes (regular not registered mail) addressed to such holders at their respective addresses appearing on the Trustee's transfer books, and deposited in any post office or post office box. The addresses of the holders of Trust Certificates, as shown on the Trustee's transfer books, shall in all cases be deemed to be the addresses of Trust Certificate holders for all purposes under this Trust Agreement, without regard to what other or different addresses the Trustee may have for any Trust Certificate holder on any other books or records of the Trustee. Every notice so given of mailing shall be the date such notice is deemed given for all purposes. 22. Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, the non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (a) will waive, in any action for specific performance, the defense of adequacy of a remedy at law and (b) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement in any action instituted in any state or federal court sitting in Wilmington, Delaware. Each party hereto consents to personal jurisdiction in any such action brought in any state or federal court sitting in Wilmington, Delaware. 11 83 IN WITNESS WHEREOF, Canadian National Railway Company and Blackhawk Merger Sub, Inc. have caused this Trust Agreement to be executed by their [ ] and [ ], respectively, and their corporate seals to be affixed, attested by their [ ] and [ ], respectively, and [ ] has caused this Trust Agreement to be executed by one of its duly authorized corporate officers and its corporate seal to be affixed, attested to by its Corporate Secretary or one of its Assistant Corporate Secretaries, the day and year first above written. Attest: Canadian National Railway Company By - --------------------------- ------------------------------- (Title) Attest: Blackhawk Merger Sub, Inc. By - --------------------------- ------------------------------- (Title) Attest: [Trustee] By - ---------------------------- ------------------------------- (Title)
12 84 ATTACHMENT A TO VOTING TRUST AGREEMENT No. Shares VOTING TRUST CERTIFICATE for COMMON STOCK $0.001 PER SHARE PAR VALUE of BLACKHAWK MERGER SUB, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS IS TO CERTIFY that will be entitled, on the surrender of this Certificate, to receive on the termination of the Voting Trust Agreement hereinafter referred to, or otherwise as provided in Paragraph 7 of said Voting Trust Agreement, (i) a certificate or certificates, as the case may be, for [______] shares of the Common Stock, $0.001 per share par value, of Blackhawk Merger Sub, Inc., a Delaware corporation (the "COMPANY"). This Certificate is issued pursuant to, and the rights of the holder hereof are subject to and limited by, the terms of a Voting Trust Agreement, dated as of __________ ___, 1997, executed by Canadian National Railway Company, a Canadian corporation, Merger Subsidiary, a Delaware corporation and [__________________], as Voting Trustee, a copy of which Voting Trust Agreement is on file in the registered office of Merger Subsidiary at [The Corporation Trust Co., 100 West Tenth Street, Wilmington, Delaware 19801], and open to inspection of any stockholder of the Company and the holder hereof. The Voting Trust Agreement, unless earlier terminated (or extended) pursuant to the terms thereof, will terminate on _________ ___, [2002], so long as no violation of 49 U.S.C. section 11323 will result from such termination. The holder of this Certificate shall be entitled to the benefits of said Voting Trust Agreement, including the right to receive payment equal to the cash dividends, if any, paid by the Company with respect to the number of shares represented by this Certificate. 85 This Certificate shall be transferable only on the books of the undersigned Voting Trustee or any successor, to be kept by it, on surrender hereof by the registered holder in person or by attorney duly authorized in accordance with the provisions of said Voting Trust Agreement, and until so transferred, the Voting Trustee may treat the registered holder as the owner of this Voting Trust Certificate for all purposes whatsoever, unaffected by any notice to the contrary. By accepting this Certificate, the holder hereof assents to all the provisions of, and becomes a party to, said Voting Trust Agreement. IN WITNESS WHEREOF, the Voting Trustee has caused this Certificate to be signed by its officer duly authorized. Dated: By_________________________________ Authorized Officer 86 [FORM OF BACK OF VOTING TRUST CERTIFICATE] FOR VALUE RECEIVED ___________________________________________ hereby sells, assigns, and transfers unto _________________________________ the within Voting Trust Certificate and all rights and interests represented thereby, and does hereby irrevocably constitute and appoint ________________________ Attorney to transfer said Voting Trust Certificate on the books of the within mentioned Voting Trust Certificate on the books of the within mentioned Voting Trustee, with full power of substitution in the premises. _______________________________ Dated: In the Presence of: _________________________________ 15 87 EXHIBIT B [Certificate of Incorporation of Surviving Corporation] 88 EXHIBIT B RESTATED CERTIFICATE OF INCORPORATION OF ILLINOIS CENTRAL CORPORATION (AS AMENDED THROUGH ______ __, 1998) ARTICLE ONE NAME. The name of the Corporation is Illinois Central Corporation. ARTICLE TWO REGISTERED AGENT. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THREE PURPOSE. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR A. SHARES. The total number of shares of stock which the Corporation shall have authority to issue is 100 shares of common stock and the par value of each share is $1.00, amounting in the aggregate to $100. B. POWERS, PREFERENCES AND RIGHTS OF COMMON STOCK. The powers, preferences and rights of the shares of common stock and the qualifications, limitations or restrictions thereof, are set forth below. 1. Dividends. The holders of outstanding shares of common stock shall be entitled to share equally and ratably with all other holders of shares of common stock then outstanding in any dividends or distributions declared on outstanding shares of common stock, when, as and if any such dividends or distributions are declared by the Corporation's Board of Directors from funds legally available therefor. 1 89 2. Liquidation, etc. The holders of outstanding shares of common stock shall be entitled to share equally and ratably with all other holders of shares of common stock then outstanding in the assets of the Corporation to be distributed among the holders of shares of the common stock upon any liquidation or winding up of the Corporation, whether voluntary or involuntary; and 3. Voting Rights. Each holder of common stock shall be entitled to vote for the election and removal of the directors of the Corporation and on all other matters on which stockholders are entitled to vote under the General Law of the State of Delaware and shall have one vote for each share of common stock held of record. ARTICLE FIVE The Board of directors shall have the power to adopt, amend or repeal the by-laws of the Corporation. ARTICLE SIX ELECTION OF DIRECTORS. A. The number of directors of the corporation shall be fixed by, or in the manner provided in, the by-laws but shall not be less than three nor more than ten. The directors shall be elected at the annual meeting of the stockholders, except as provided in Paragraph B herein, and each director so elected shall serve until his successor has been duly elected and qualified, unless he shall cease to serve by reason of death, resignation or other cause. B. Newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of Directors resulting from death, resignation or other cause may be filled only by a majority vote of the directors then in office, though less than a quorum, or a sole remaining director. Any director so chosen shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. ARTICLE SEVEN LIABILITY AND INDEMNIFICATION OF DIRECTORS. A. 1. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith 2 90 or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction under which a director derived an improper personal benefit. 2. If the General Corporation Law of the State of Delaware is hereafter amended to further eliminate or limit the liability of a director of a corporation, then a director of the Corporation, in addition to the circumstances set forth herein, shall not be liable to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended. B. 1. Each person who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law. The right to indemnification conferred in this Article Seven shall also include the right to be paid by the Corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by applicable law. The right to indemnification conferred in this Article Seven shall be a contract right. 2. The Corporation shall determine the right of any person to receive indemnification as provided hereunder in accordance with the provisions of applicable law. 3. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any expense, liability or loss incurred by such person in any such capacity, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under applicable law. C. The rights and authority conferred in this Article Seven shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Restated Certificate of Incorporation or the by-laws of the Corporation, agreement, vote of stockholders or disinterested directors or otherwise. D. Neither the amendment nor repeal of this Article Seven, nor the adoption of any provision of this Restated Certificate of Incorporation or the 3 91 by-laws of the Corporation or of any statute inconsistent with this Article Seven, shall eliminate or reduce the effect of this Article Seven in respect of any acts or omissions occurring prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE EIGHT RESERVED RIGHTS. The corporation reserves the right to further amend this Restated Certificate of Incorporation in any manner permitted by the General Corporation Law of the State of Delaware, as amended from time to time, and all rights and powers conferred herein on stockholders, directors and officers, if any, are subject to this reserved power. 4 92 EXHIBIT C [Bylaws of Surviving Corporation] 93 EXHIBIT C Amended and Restated By-Laws of ILLINOIS CENTRAL CORPORATION As Amended and Restated ________ __, 1998 ARTICLE 1 OFFICES SECTION 1.01. Registered Office in Delaware. The registered office of Illinois Central Corporation (hereinafter called the "Corporation") in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company. SECTION 1.02. Other Offices. The Corporation may have such other offices in such places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE 2 MEETINGS OF STOCKHOLDERS; STOCKHOLDERS' CONSENT IN LIEU OF MEETING SECTION 2.01. Annual Meeting. The annual meeting of stockholders for the election of directors and for the transaction of suchother business as may properly come before the meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated by the Board of Directors. SECTION 2.02. Special Meetings. A special meeting of stockholders, for any purpose or purposes, may be called at any time by any member of the Board of Directors or by the President of the Corporation. Any such meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated in the notice of such meeting. SECTION 2.03. Notice of Meetings. Unless waived in writing by the stockholder of record or unless such stockholder is represented thereat in person or by proxy, each stockholder of record shall be given written notice of each 5 94 meeting of stockholders, which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Such notice shall be given at least ten days before the date fixed for such meeting. SECTION 2.04. Quorum. At each meeting of stockholders, the holders of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at such meeting, present in person or by proxy, shall constitute a quorum for the transaction of business, except where otherwise provided by law, the Certificate of Incorporation or these By-Laws. In the absence of a quorum, any officer entitled to preside at, or act as secretary of, such meeting shall have the power to adjourn the meeting from time to time until a quorum shall be constituted. At any such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called, but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 2.05. Voting. Except as otherwise provided in the Certificate of Incorporation, at every meeting of stockholders each holder of record of the issued and outstanding stock of the Corporation entitled to vote thereat shall be entitled to one vote, in person or by proxy, for each share of stock held by such stockholder. Shares of capital stock of the Corporation belonging to the Corporation directly or indirectly shall not be voted directly or indirectly. At all meetings of stockholders, a quorum being present, all matters shall be decided by majority vote of the shares of stock entitled to vote thereat, except as otherwise required by the laws of the State of Delaware. Unless demanded by a stockholder of the Corporation present in person or by proxy at any meeting of stockholders and entitled to vote thereat or so directed by the chairman of the meeting or required by the laws of the State of Delaware, the vote thereat on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or in his name by his proxy, if there be such proxy, and shall state the number of shares voted by him and the number of votes to which each share is entitled. SECTION 2.06. Stockholders' Consent in Lieu of Meeting SECTION 2.06. Stockholders' Consent in Lieu of Meeting. Any corporate action requiring a vote of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such writing or writings shall be filed with the minutes of stockholders' meetings and prompt notice of the taking of any such action without a meeting by 6 95 less than unanimous written consent shall be given to those stockholders who have not so consented in writing. ARTICLE 3 BOARD OF DIRECTORS SECTION 3.01. General Powers. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. SECTION 3.02. Number and Term of Holding Office. The number of directors which shall constitute the whole Board of Directors shall be such number not fewer than one nor more than ten as shall from time to time be fixed by the Board of Directors or the stockholders. Each of the directors of the Corporation shall hold office until the annual meeting next after his election and until his successor shall be elected and shall qualify or until his earlier death or resignation or removal in the manner hereinafter provided. SECTION 3.03. Organization and Order of Business. At each meeting of the Board of Directors, any director chosen by a majority of the directors present thereat shall act as chairman of the meeting and preside thereat. The Secretary of the Corporation or, in the case of his absence, any person whom the chairman shall appoint, shall act as secretary of such meeting and keep the minutes thereof. SECTION 3.04. Resignations. Any director may resign at any time by giving written notice of his resignation to the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, then it shall take effect when accepted by action of the Board of Directors. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.05. Removal of Directors. Any director may be removed, either with or without cause, at any time by vote of a majority in interest of the stockholders of the Corporation. SECTION 3.06. Vacancies. Any vacancy in the Board of Directors, arising from death, resignation, removal, an increase in the number of directors or any other cause, may be filled either by a majority vote of the remaining directors, although less than a quorum, or by the stockholders of the Corporation at the next annual meeting or any special meeting called for the purpose. SECTION 3.07. Place of Meeting. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the 7 96 Board may from time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof. SECTION 3.08. Meetings. (a) Annual Meetings. As soon as practicable after each annual election of directors, the Board of Directors shall meet for the purpose of organization and the transaction of other business. (b) Other Meetings. Other meetings of the Board of Directors shall be held at such times and places as the Board shall from time to time determine or upon call by the President of the Corporation. SECTION 3.09. Notice of Meetings. The Secretary of the Corporation shall give notice to each director of each meeting, including the time and place of such meeting. Notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least three days before the day on which such meeting is to be held, or shall be sent to him by telegraph, cable, wireless or other form of recorded communication or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. Notice of any meeting shall not be required to be given to any director who shall attend such meeting. A written waiver of notice, signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to adequate notice. SECTION 3.10. Quorum and Manner of Acting. Except as provided by law, the Certificate of Incorporation or these By-Laws, a majority of the directors then in office shall be necessary at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. SECTION 3.11. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board or such committee. 8 97 SECTION 3.12. Meetings by Telephone, Etc. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of the Board, or of such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. SECTION 3.13. Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at meetings of the Board of Directors or of any committee thereof, or both, as the Board shall from time to time determine. The Board may likewise provide that the Corporation shall reimburse each director or member of a committee for any expenses incurred by him on account of his attendance at any such meeting. Nothing contained in this Section shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 3.14. Committees. The Board of Directors, by resolution passed by a majority of the whole Board, may designate members of the Board to constitute one or more committees, which shall in each case consist of such number of directors, not fewer than two, and shall have and may exercise such powers as the Board may by resolution determine and specify in the respective resolutions appointing them. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide. The Board shall have power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. ARTICLE 4 OFFICERS SECTION 4.01. Number. The officers of the Corporation shall be a President, one or more Vice Presidents, a Treasurer and a Secretary. Each such officer shall be elected by the Board of Directors at its initial organization meeting and thereafter at its annual meeting and shall hold office until the next succeeding annual meeting of the Board and until his successor is elected or until his earlier death or resignation or removal in the manner hereinafter provided. The Board may elect or appoint such other officers of the Corporation (including one or more Assistant Treasurers and one or more Assistant Secretaries) as it deems necessary who shall have such authority and shall perform 9 98 such duties as the Board may prescribe. If additional officers are elected or appointed during the year, each of them shall hold office until the next annual meeting of the Board at which officers are regularly elected or appointed and until his successor is elected or appointed or until his earlier death or resignation or removal in the manner hereinafter provided. A vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for election or appointment to such office. All officers and agents elected or appointed by the Board shall be subject to removal at any time by the Board with or without cause. Any officer may resign at any time by giving written notice to the President or the Secretary of the Corporation, and such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, it shall take effect when accepted by action of the Board. Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective. SECTION 4.02. The President. The President of the Corporation, subject to the direction of the Board of Directors, shall be the chief executive officer of the Corporation, shall have general charge of the business and affairs of the Corporation, shall have the direction of all other officers, agents and employees and may assign such duties to the other officers of the Corporation as he deems appropriate. SECTION 4.03. Vice Presidents. Each Vice President shall have such powers and perform such duties as the President or the Board may from time to time prescribe and shall perform such other duties as may be prescribed by these By-Laws. At the request of the President, or in case of his absence or inability to act, any of the Vice Presidents shall perform the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. SECTION 4.04. Treasurer. The Treasurer of the Corporation shall have charge and custody of and be responsible for all funds and securities of the Corporation and its books of account. SECTION 4.05. Secretary. The Secretary of the Corporation shall keep the records of all meetings of the stockholders and the Board of Directors. He shall affix the seal of the Corporation to all deeds, contracts, bonds or other instruments requiring the corporate seal when the same shall have been signed on behalf of the Corporation by a duly authorized officer and shall be the custodian of all 10 99 contracts, deeds, documents and all other indicia of title to properties owned by the Corporation and of its other corporate records. ARTICLE 5 CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 5.01. Execution of Documents. Any member of the Board of Directors and any officer, employee or agent of the Corporation designated by the Board of Directors shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation, and the Board of Directors may authorize any such officer, employee or agent to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. SECTION 5.02. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board of Directors or the President or any other officer of the Corporation to whom power in that respect shall have been delegated by the Board shall select. ARTICLE 6 BOOKS AND RECORDS The books and records of the Corporation may be kept at such places within or without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE 7 SEAL The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the word "Delaware" and figures representing the year of its incorporation. 11 100 ARTICLE 8 INDEMNIFICATION To the extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as now in effect and as from time to time amended, or any successor provisions thereto, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether or not such action is an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. ARTICLE 9 SHARES AND THEIR TRANSFER SECTION 9.01. Certificates of Stock. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number of shares owned by him or it in the Corporation, which shall otherwise be in such form as the Board of Directors shall prescribe. Each such certificate shall be signed by the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation. In case any officer or officers who shall have signed any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation, removal or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate had not ceased to be such officer or officers of the Corporation. SECTION 9.02. Record. A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, and the date thereof, and, in the case of cancellation, the date of cancellation. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 9.03. Transfer of Stock. Transfers of shares of the'stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on the surrender of the certificate or certificates for such shares properly endorsed. 12 101 SECTION 9.04. Lost, Destroyed or Mutilated Certificate. In case of the alleged loss or destruction or the mutilation of a certificate representing stock of the Corporation, a new certificate may be issued in place thereof, in the manner and upon such terms as the Board of Directors may prescribe. ARTICLE 10 AMENDMENTS These By-Laws, or any of them, may be altered, amended or repealed, or new By-Laws may be made, by the stockholders entitled to vote thereon at any annual or special meeting thereof or by the board of directors. 13 102 EXHIBIT D Terms and Conditions of the Merger PART I--CHANGES TO CONVERT TO ALL CASH TRANSACTION In addition to the provisions included in this Agreement that contemplate the conversion to an Offer for all of the issued and outstanding shares of IC Common Stock pursuant to Section 1.04, the parties to this Agreement agree that the Agreement shall be modified in the following manner. (a) References to 46,051,761 in the recitals and in Section 1.01 shall be changed to the number representing all of the issued and outstanding shares of IC Common Stock at the date this Agreement is so modified. (b) References to "75% of the currently outstanding shares of IC Common Stock" in the recitals shall be changed to "all of the currently issued and outstanding shares of IC Common Stock". (c) Sections 2.02(c) and 2.02(d) shall be deleted and shall be replaced by a new Section 2.02(c), which shall read in full as set forth below: "(c) Each share of IC Common Stock outstanding immediately prior to the Effective Time shall, except as provided in Section 2.02(a), be converted into the right to receive an amount of cash equal to $39.00 (the "Merger Consideration")." (d) Section 2.06 shall be deleted. (e) References to the "Form F-4" in Section 5.09 shall be deleted. (f) Sections 8.05 and 8.06 shall be deleted. (g) References to the "Form F-4" in Section 9.01 shall be deleted and the following sentence shall be added as the first sentence of Section 9.01: "If the conditions set forth in Section 253 of the Delaware Law are satisfied and subject to the terms of the Voting Trust Agreement, CN shall cause the trustee of the Voting Trust to effect the Merger pursuant to Section 253 of Delaware Law and the parties to this Agreement agree to use all reasonable best efforts to satisfy the requirements of Section 253 of Delaware Law." (h) Section 7.07 shall be deleted. 103 (i) Section 10.02 shall be deleted. (j) The May 29, 1998 date set forth in Section 11.02(c) shall be extended by the same number of business days as the number of business days by which Merger Subsidiary has extended the Offer in connection with the amendment of the Offer contemplated by Section 1.04(i). (k) References to the Investment Commitment Agreements shall be deleted. PART II--CHANGES TO CONVERT TO ONE-STEP MERGER TRANSACTION In addition to the provisions included in this Agreement that contemplate the conversion to a one-step Merger pursuant to Section 1.04, the parties to this Agreement agree that the Agreement shall be modified in the following manner: (a) Section 1.01 shall be deleted (except for defined terms used in the deleted provisions that are used in other sections of the Agreement). (b) References to the Offer in Section 1.02(a) shall be deleted, and Section 1.02(b) shall be deleted. (c) Section 2.02(c) shall be deleted. (d) Section 2.02(d) shall be modified to delete the words "if Merger Subsidiary shall have purchased, pursuant to the Offer an aggregate of less than 46,051,761 shares of IC Common Stock," in the first sentence of such section. (e) Sections 3.03(b), (c) and (d) shall be modified to provide that the appointments set forth therein will not be made until the Effective Time. (f) Section 7.05 shall be deleted. (g) Article 10 shall be deleted in its entirety and replaced with the following: "ARTICLE 10 "CONDITIONS TO THE MERGER "SECTION 10.01 Conditions to the Obligations of Each Party. The obligations of the parties to consummate the Merger are subject to the satisfaction of the following conditions: 2 104 "(a) this Agreement shall have been adopted by the stockholders of IC in accordance with Delaware Law; "(b) any applicable waiting period under the HSR Act relating to the Merger shall have expired; "(c) the Form F-4 shall have been declared effective under the 1933 Act and no stop order suspending the effectiveness of the Form F-4 shall be in effect and no proceeding for such purpose shall be pending or threatened by the SEC; "(d) there shall not have been instituted or be pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal the Voting Trust or the consummation of the Merger, seeking to obtain material damages or otherwise directly or indirectly relating to the transactions contemplated by the Merger (including the Voting Trust), (ii) except for the Voting Trust, seeking to restrain or prohibit CN's ownership or operation (or that of its respective Subsidiaries or Affiliates) of all or any material portion of the business or assets of IC and its Subsidiaries, taken as a whole, or of CN and its Subsidiaries, taken as a whole, or to compel CN or any of its Subsidiaries or Affiliates to dispose of or hold separate all or any material portion of the business or assets of IC and its Subsidiaries, taken as a whole, or of CN and its Subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking to impose or confirm material limitations on the ability of CN or any of its Subsidiaries or Affiliates effectively to exercise full rights of ownership of the IC Common Stock, including, without limitation, the right to vote any shares of such stock acquired or owned by CN or any of its Subsidiaries or Affiliates on all matters properly presented to the stockholders of IC, or (iv) seeking to require divestiture by CN or any of its Subsidiaries or Affiliates of any such shares; "(e) there shall not have been any action taken, or any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or deemed applicable to the Merger (including the Voting Trust), by any court, government or governmental authority or agency, domestic or foreign (other than (i) the application of the waiting period provisions of the HSR Act to the Merger and (ii) the waiting period prior to receipt of STB approval or exemption with respect to the exercise of control by CN over the Railroad Subsidiaries), that would reasonably be 3 105 likely, directly or indirectly, to result in any of the consequences referred to in clauses (i) through (iv) of paragraph (d) above; and "(f) the staff of the STB shall have given a favorable informal advisory option to the effect that the proposed use of the voting trust will preclude control of the Railroad Subsidiaries. "SECTION 10.02. Conditions to the Obligations of Merger Subsidiary. The obligations of Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following further conditions: "(a) no change shall have occurred or been threatened (and no development shall have occurred or been threatened involving a prospective change) in the business, assets, liabilities, financial condition, capitalization, operations or results of operations of IC or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect with respect to IC; "(b) IC shall not have breached or failed to perform in any material respect any of its covenants or agreements under this Agreement, and each of the representations and warranties of IC set forth in this Agreement shall be true in all material respects when made and as of the Effective Time as if made at and as of such time (unless such representation or warranty is made only as of a specific date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect") does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and "(c) the staff of the STB shall have given CN a favorable informal advisory opinion to the effect that the proposed use of the Voting Trust will preclude unlawful control of IC by CN. "SECTION 10.03. Conditions to the Obligations of IC. The obligations of IC to consummate the Merger are subject to the satisfaction of the following further conditions: "(a) CN shall have performed in all material respects all of the respective obligations hereunder required to be performed at or prior to the Effective Time, the representations and warranties of CN and contained in this Agreement and in any certificate or other writing delivered by CN or pursuant hereto shall be true in all material respects at and as of the Effective Time as if made at and as of such time; and 4 106 "(b) The shares of CN Common Stock to be issued in the Merger (if any) shall have been approved for listing on the NYSE, subject to official notice of issuance." (h) A new paragraph (j) shall be added to Section 11.01, which shall read as follows: "(j) by either CN or IC if either (i) at the meeting of the stockholders of IC held to consider adoption of the Agreement, such stockholders shall fail to adopt the Agreement or (ii) this Agreement shall not have been adopted by the stockholders of IC in accordance with the Delaware Law by October 30, 1998." (i) A new clause (iii) shall be added to Section 9.02(b), which shall read as follows: "(iii) within two days of the execution of a definitive agreement with respect to any Acquisition Proposal if IC enters into such a definitive agreement within 15 months after the termination of this Agreement pursuant to Section 11.01(j) and an Acquisition Proposal was publicly announced prior to the date of such termination." (j) Annex I shall be deleted. The parties agree that any cross-references, section references or designations or schedule designations shall be deemed to be modified to reflect the modifications set forth in this Exhibit D. The parties shall use their reasonable best efforts in good faith to make any further modifications to this Agreement that are necessary or appropriate to reflect a Section 1.04 election. 5 EX-99.C.2 13 INVESTMENT COMMITMENT AGREEMENT 1 CONFORMED COPY INVESTMENT COMMITMENT AGREEMENT dated February 10, 1998 between Gilbert H. Lamphere (the "STOCKHOLDER") and Canadian National Railway Company, a corporation organized under the laws of Canada (the "COMPANY"). WHEREAS, the Company intends to acquire Illinois Central Corporation ("IC"), a Delaware company, pursuant to an agreement and plan of merger (the "MERGER AGREEMENT") dated as of the date hereof. WHEREAS, the Stockholder is the beneficial owner of certain shares of common stock, par value $0.001 per share, of IC ("IC COMMON STOCK") and certain options to purchase shares of IC Common Stock as of the date hereof. WHEREAS, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and, intending to be legally bound, the parties hereto agree as follows: ARTICLE 1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER SECTION 1.01. BINDING AGREEMENT. The Stockholder has full legal power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement constitutes a valid and binding agreement of the Stockholder, enforceable in accordance with its terms. SECTION 1.02. NON-CONTRAVENTION. The execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby do not and will not (a) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Stockholder or (b) constitute a default under any provision of any agreement, contract or other instrument binding upon the Stockholder. 2 ARTICLE 2 ROLLOVER AND REINVESTMENT OF PROCEEDS SECTION 2.1. AGREEMENT TO ROLL OVER OPTIONS. The Stockholder agrees, subject to applicable law, that at the Effective Time (as defined in the Merger Agreement) he will permit all options ("OPTIONS") to purchase shares of IC Common Stock then owned by him to be amended and converted into options to purchase shares of common stock, no par value, of the Company ("CN COMMON STOCK") in accordance with the terms of Section 2.07 of the Merger Agreement. SECTION 2.2. REINVESTMENT OF PROCEEDS. The Stockholder agrees that, within 90 days of the Effective Time (provided that such period shall be extended for any period during which he is precluded from purchasing shares of CN Common Stock pursuant to applicable law), he will have acquired at least 98,150 shares of CN Common Stock pursuant to the Merger or pursuant to open market purchases, provided that the Stockholder shall not be obligated to invest an aggregate amount in excess of $5,300,000 of proceeds from the Offer and/or the Merger (as such terms are defined in the Merger Agreement). For purposes of this Section 2.02, any shares of CN Common Stock issued to the Stockholder pursuant to the Merger shall be deemed to represent an investment in an amount equal to the product of the number of shares of CN Common Stock so received and the average closing trading price per share of CN Common Stock on the NYSE for the 5 trading days immediately following the date of receipt. SECTION 2.03. TRUSTS. Any acquisitions of shares of CN Common Stock by trusts for the descendants of Stockholder shall ratably decrease Stockholder's obligations with respect to the acquisition of shares pursuant to Section 2.02. ARTICLE 3 VOTING OF SHARES SECTION 3.1. THE IC STOCKHOLDERS' MEETING. The Stockholder agrees that at any meeting of stockholders of IC held to adopt the Merger Agreement for which proxies are solicited, he will vote all of his shares in favor of such action. 3 ARTICLE 4 MISCELLANEOUS SECTION 4.1. TERMIRMINATION OF THE AGREEMENT. This Agreement shall automatically terminate, without action by either party, upon the termination of the Merger Agreement in accordance with its terms or, if the Company has elected to amend the terms of the Offer to be an all-cash offer in accordance with Section 1.04 of the Merger Agreement. SECTION 4.2. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to the Stockholder, to: Gilbert H. Lamphere c/o Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Telecopy: 212-455-2502 with copies to: Ronald A. Lane, Esq. Illinois Central Corporation 455 North Cityfront Plaza Drive Chicago, Illinois 60611-5504 Telecopy: (312) 755-7669 John G. Finley, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Telecopy: (212) 455-2502 Jean Pierre Ouellet, Esq. Canadian National Railway Company 935, rue de la Gauchetiere Ouest Montreal, (Quebec) Canada Telecopy: (514) 399-3779 3 4 Winthrop B. Conrad, Jr., Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telecopy: (212) 450-4800 or such other addresses or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section. SECTION 4.03. AMENDMENTS; NO WAIVERS, (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto or in the case of a waiver, by the party against whom the waiver is to be effective. SECTION 4.04. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 4.05. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 4.06. ENTIRE AGREEMENT. This Agreement and the agreements referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. Canadian National Railway Company By: /s/ Paul Tellier ---------------------------------- Name: Paul Tellier Title: President and CEO Gilbert H. Lamphere By: /s/ Gilbert H. Lamphere ---------------------------------- EX-99.C.3 14 INVESTMENT COMMITMENT AGREEMENT 1 CONFORMED COPY INVESTMENT COMMITMENT AGREEMENT dated February 10, 1998 between Alexander P. Lynch (the "STOCKHOLDER") and Canadian National Railway Company, a corporation organized under the laws of Canada (the "COMPANY"). WHEREAS, the Company intends to acquire Illinois Central Corporation ("IC"), a Delaware company, pursuant to an agreement and plan of merger (the "MERGER AGREEMENT") dated as of the date hereof. WHEREAS, the Stockholder is the beneficial owner of certain options to purchase shares of common stock, par value $0.001 per share, of IC ("IC COMMON STOCK"). WHEREAS, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and, intending to be legally bound, the parties hereto agree as follows: ARTICLE 1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER SECTION 1.01. BINDING AGREEMENT. The Stockholder has full legal power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement constitutes a valid and binding agreement of the Stockholder, enforceable in accordance with its terms. SECTION 1.02. NON-CONTRAVENTION. The execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby do not and will not (a) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Stockholder or (b) constitute a default under any provision of any agreement, contract or other instrument binding upon the Stockholder. 2 ARTICLE 2 ROLLOVER OF OPTIONS SECTION 2.01. AGREEMENT TO ROLL OVER OPTIONS. The Stockholder agrees, subject to applicable law, that at the Effective Time (as defined in the Merger Agreement) he will permit all options ("OPTIONS") to purchase shares of IC Common Stock then owned by him to be amended and converted into options to purchase shares of common stock, no par value, of the Company ("CN COMMON STOCK") in accordance with the terms of Section 2.07 of the Merger Agreement. The obligations of Stockholder set forth in this Section 2.01 shall terminate if the closing trading price per share of CN Common Stock on the NYSE at any time after the date of this Agreement exceeds levels anticipated by the parties. ARTICLE 3 VOTING OF SHARES SECTION 3.01. THE IC STOCKHOLDERS' MEETING. The Stockholder agrees that at any meeting of stockholders of IC held to adopt the Merger Agreement for which proxies are solicited, he will vote all of his shares in favor of such action. ARTICLE 4 MISCELLANEOUS SECTION 4.01. TERMINATION OF THE AGREEMENT. This Agreement shall automatically terminate, without action by either party, upon the termination of the Merger Agreement in accordance with its terms or, if the Company has elected to amend the terms of the Offer to be an all-cash offer in accordance with Section 1.04 of the Merger Agreement. 2 3 SECTION 4.2. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to the Stockholder, to: Alexander P. Lynch c/o Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Telecopy: 212-455-2502 with copies to: Ronald A. Lane, Esq. Illinois Central Corporation 455 North Cityfront Plaza Drive Chicago, Illinois 60611-5504 Telecopy: (312) 755-7669 John G. Finley, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Telecopy: (212) 455-2502 Jean Pierre Ouellet, Esq. Canadian National Railway Company 935, rue de la Gauchetiere Ouest Montreal, (Quebec) Canada Telecopy: (514) 399-3779 Winthrop B. Conrad, Jr., Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telecopy: (212) 450-4800 or such other addresses or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section. 3 4 SECTION 4.3. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the parties hereto or in the case of a waiver, by the party against whom the waiver is to be effective. SECTION 4.4. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 4.5. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 4.6. ENTIRE AGREEMENT. This Agreement and the agreements referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. Canadian National Railway Company By: ____________________________ Name: Title: Alexander P. Lynch By: ____________________________ EX-99.C.4 15 CONFIDENTIALITY AGREEMENT 1 AGREEMENT FOR NON-DISCLOSURE OF PROPRIETARY INFORMATION AND STANDSTILL This Agreement, made as of this 13th day of March, 1997, by and between CANADIAN NATIONAL RAILWAY COMPANY, with a principal place of business located at 935 de La Gauchetiere St. W., Montreal, Province of Quebec, Canada, and ILLINOIS CENTRAL CORP., with a principal place of business located at 455 North Cityfront Plaza Drive, Chicago, State of Illinois, is to assure the protection and preservation of the confidential and proprietary nature of information to be disclosed or made available under this Agreement, and shall be governed by and enforceable under, the laws of the State of New York. RECITALS WHEREAS, the parties hereto (each referred to herein as a "Party") are giving consideration to a possible transaction, including a possible business combination, joint venture or other possible arrangement involving the parties (a "Business Arrangement") and in connection therewith it is expected that each Party furnish to the other Party certain Proprietary Information (as defined below); AND WHEREAS, each Party desires to assure the confidential and proprietary status of the Proprietary Information which may be disclosed hereunder; AND WHEREAS, the parties also desire that any Proprietary Information that is disclosed pursuant to the terms of this Agreement to the other Party or, as permitted hereunder, to its directors, officers, employees, affiliates, representatives (including financial advisors, attorneys and accountants) or agents (collectively, "Representatives"), be used only for the purposes of evaluating a possible Business Arrangement; AGREEMENT NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged; the parties agree as follows: 1. The Party receiving Proprietary Information (the "Recipient") and its Representatives will protect all Proprietary Information received under this Agreement from any disclosure to third parties or the use of such Proprietary Information beyond that allowed under this Agreement, in each case, in accordance with this Agreement, and will not engage in such disclosure or use without the prior express written permission of the Party disclosing such information (the "Disclosing Party"). 2. Proprietary Information which may be supplied and is protected under this Agreement includes, but is not limited to: all business plans, specifications, reports, manuals, data books, computer programs, techniques, employment arrangements, and all other business practices or information of a private nature on any media whatsoever, and any derivatives of the foregoing, including, without limitation, any notes, analyses, compilations, studies, memoranda or other documents prepared by the Recipient, or its Representatives, which contain, reflect or are based on, in whole or in part, such proprietary information (collectively, "Proprietary Information"). Such Proprietary Information includes data transferred in the form of, but not limited to, oral, written, graphic or computer media including telephone, and meeting conversations, as well as all analyses, compilations, forecasts, studies or other documents which include any Proprietary Information. The term "Proprietary Information" does not include confidential information which (i) becomes generally available to the public other than as a result of a disclosure by Disclosing Party or Disclosing Party's Representatives, (ii) was available to Recipient on a non-confidential basis prior to its disclosure to Recipient by Disclosing Party or its Representatives, (iii) is independently developed by the Recipient or its Representatives without the use of any Proprietary Information of the Disclosing Party, or (iv) becomes available to Recipient on a non-confidential basis from a source other than Disclosing Party or its Representatives, provided that such source, to Recipient's knowledge, is not bound by a confidentiality agreement with Disclosing Party or its Representatives, or is otherwise prohibited from transmitting the information to Recipient by a contractual, legal, or fiduciary obligation. In the event that Recipient or its Representatives are requested or required (by oral questions, interrogatories, requests for information or 2 documents in legal proceedings, subpoena, civil investigation demand or other similar process) or required by the rules of any relevant stock exchange or other relevant regulatory authority to disclose any Proprietary Information, Recipient or its Representatives shall provide the Disclosing Party with prompt notice of any such request or requirement so that the Disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the Disclosing Party, the Recipient or its Representatives are nonetheless, in the opinion of counsel, required to disclose Proprietary Information, the Recipient or its Representatives may, without liability hereunder, disclose only that portion of the Proprietary Information which in the opinion of counsel is legally required to be disclosed; provided that the Recipient or its Representatives attempt to preserve the confidentiality of the Proprietary Information, including, without limitation, by cooperating with the Disclosing Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Proprietary Information. 3. Recipient agrees to keep confidential or protect such Proprietary Information as it would its own confidential and proprietary information at the highest level of proprietary material. Disclosure of such Proprietary Information shall be restricted to those Representatives of Recipient who (i) have a need to know the information for the purpose of evaluating a possible Business Arrangement between the parties and (ii) are informed by the Disclosing Party of the confidential and proprietary nature of the Proprietary Information. The Disclosing Party will cause its Representatives to observe the terms of this Agreement and the Disclosing Party will be responsible for any breach of this Agreement by any of its Representatives. 4. All Proprietary Information, including all applicable intellectual property rights residing in the Proprietary Information (including without limitation, patents, copyrights, industrial designs, trademarks and trade secrets), unless otherwise specified in writing by Disclosing Party, are and shall remain the exclusive property of Disclosing Party, including any and all reproductions in any form of said Proprietary Information. All such Proprietary Information (whether prepared by the Recipient or its Representatives on its behalf) shall be returned or destroyed, at the election of Disclosing Party or upon request of Disclosing Party provided, however, that all notes, analyses, conditions, studies, interpretations, memoranda or other documents, to the extent that they contain, reflect or are based upon the Proprietary Information, may be destroyed (rather than delivered); provided further that Board or Board Committee minutes need neither be delivered nor destroyed. Upon the request of Disclosing Party, Recipient shall execute a certificate of destruction of such Proprietary Information when destroyed by Recipient, whether intentionally or accidentally, and transmit the same to Disclosing Party. 5. Proprietary Information supplied under this Agreement shall only be reproduced when legitimately required for Recipient's purposes and in conformity with the provisions hereof. 6. Recipient hereby agrees that it will not use the Proprietary Information for any reason or purpose other than to evaluate a possible Business Arrangement with the Disclosing Party and that the use of the Proprietary Information supplied hereunder shall be limited to Recipient's activities in connection therewith. For greater certainty nothing contained in this Agreement will be construed as granting or conferring upon the Recipient or its Representatives, any rights by license or otherwise, for any invention, discovery or improvement made, conceived or acquired, prior to or after the date of this Agreement based in whole, or in part, upon Proprietary Information provided to the Recipient or its Representatives hereunder. 7. Neither Party, nor any of their respective Representatives will, without the prior written consent of the other Party, disclose to any person the fact that the Proprietary Information exists or has been made available, that such Party is considering a proposed Business Arrangement with the other Party, or that discussions or negotiations are taking or have taken place concerning a proposed Business Arrangement or any term condition or other fact relating to a proposed Business Arrangement or such discussions or negotiations, including, without limitation, the status thereof, except if it has received legal advice that such disclosure is reasonably required under then existing circumstances pursuant to any securities or similar laws of any relevant state or country, or rules of any relevant stock exchange or other relevant authority of whatever nature; provided, however, that each Party agrees to use reasonable best efforts to consult with the other before issuing an announcement or a public statement. 2 3 8. In the event that Recipient violates this Agreement or Disclosing Party has reasonable cause to feel that its Proprietary Information is in danger of being disclosed or misused, either Party may at any time, in addition to all other recourse under law, terminate this Agreement and demand and be entitled to the return from Recipient of all Proprietary Information in all existing forms. 9. It is further understood and agreed that money damages may not be a sufficient remedy for any breach of this Agreement by Recipient and that Disclosing Party shall be entitled to equitable relief, including injunctions and orders for specific performance, as a remedy for any such breach or threatened breach. Such remedy shall not be deemed to be the exclusive remedy for breach of this Agreement but shall be in addition to all other remedies available at law or equity to Disclosing Party. 10. Neither Party, nor any of their Representatives or controlling persons within the meaning of Section 20 of the Securities Exchange Act of 1934, as amended, makes any express or implied representation or warranty as to the accuracy or completeness of the Proprietary Information disclosed hereunder, and each Party agrees that no such person will have any liability relating to the Proprietary Information or for any errors therein or omissions therefrom. Each Party further agrees that neither Party shall be entitled to rely on the accuracy or completeness of the Proprietary Information and that each Party will be entitled to rely solely on such representations and warranties as may be included in any definitive agreement with respect to any agreement that may be entered into between the parties hereafter, subject to such limitations and restrictions as may be contained therein. 11. Each Party agrees that until the expiry of eighteen (18) months from the date of this Agreement, each Party or its parent and affiliated companies (herein, collectively a "Party"), will not, and each Party will direct its parent and affiliated companies not to, except with the prior written consent of the other Party (i) purchase, acquire, obtain or hold (or offer or agree to purchase, acquire, obtain or hold) beneficial ownership of any of the securities of the other Party; (ii) make, or in any way participate in any solicitation of proxies to vote, or seek to advise or influence any person with respect to the voting of any of the other Party's securities; (iii) enter into, or agree to enter into or seek or propose any merger, consolidation, business combination, tender or exchange offer, sale or purchase of assets or securities, dissolution, liquidation, restructuring, recapitalization or similar transaction involving the other Party; (iv) act, alone or together with any person, to control or influence the management or the Board of Directors or other Party; or (v) advise, encourage, or assist any person in the acquisition of beneficial ownership of any of the other Party's securities or control of the other Party or a significant portion of its significant assets; provided, however, that such restrictions (or the restrictions set forth in the next sentence) shall terminate in the event that a third party publicly commences a tender or exchange offer, or otherwise proposes a merger or business combination transaction, in respect of the other Party and such other Party has (a) exempted such transaction for purposes of Section 203 of the Delaware General Corporation Law, or (b) publicly announced or publicly confirmed that it is engaged in negotiations in connection with such proposed transaction; provided, further, any such termination shall not relieve the parties of any obligations hereunder with respect to the Proprietary Information. Each Party also agrees during such eighteen (18) month period not to (i) request the other Party or its Representatives, directly or indirectly, to amend or waive any provisions of this paragraph (including this sentence) or (ii) take any initiative in respect of the other Party which would, upon the advice of counsel, reasonably require the other Party to make a public announcement regarding the possibility of such Party acquiring, with or without others, control of the other Party whether by means of business combination or otherwise. For purposes of this Section 11, Party shall include its parent and affiliated companies. 12. If, at any time during the period prior to the time that either Party notifies the other of its decision not to proceed with any Business Arrangement, either Party is approached by, or commences discussions with, any third party concerning its or their participation in a transaction involving the other's securities or a significant portion of its assets or its significant businesses, the contacted Party will promptly inform the other of the nature of such contact and the parties thereto. 13. This Agreement shall supersede all prior oral and written agreements, communications and documents between the parties with respect to the subject matter hereof and no modification to this Agreement shall be effective unless approved in writing by both parties. A waiver of any term of this 3 4 Agreement shall, to be effective, be evidenced in writing by the waiving Party. Each Party agrees that, unless and until a definitive agreement between each of the Parties with respect to a Business Arrangement has been executed and delivered, neither of us will be under any legal obligation of any kind whatsoever with respect to any such transaction by the Party's Representatives except, in the case of this Agreement, for the matters specifically agreed to herein. For purposes of this Agreement, the term "definitive agreement" shall not include an executed letter of intent or any other preliminary written agreement unless and to the extent it expressly states that it is to be legally binding. The agreement set forth in this paragraph may be modified or waived only by a separate writing by each of us expressly so modifying or waiving such agreement. 14. Nothing in this Agreement shall grant to either Party the right to make commitments of any kind for or on behalf of the other Party. 15. The provisions of this Agreement pertaining to Proprietary Information disclosed under this Agreement shall continue and survive for a period of three (3) years after the termination of this Agreement. 4 5 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CANADIAN NATIONAL RAILWAY COMPANY BY: /s/ Jean Pierre Ouellet ITS: Chief Legal Officer & Corporate Secretary ILLINOIS CENTRAL CORP. BY: ITS: 5 -----END PRIVACY-ENHANCED MESSAGE-----