Company Name: Rio Grande Industries, Inc.
Public Availability Date: 04-05-1989
[INQUIRY LETTER 1]
HOLME ROBERTS & OWEN
DENVER TECHNOLOGICAL CENTER, SUITE 900, 8400 EAST PRENTICE AVENUE
ENGLEWOOD, COLORADO 80111
TELEPHONE(303) 796-7005 October 12, 1988 Securities Act of 1933
Section 2(3)
Rule 144 October 12, 1988 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549 Re: Rio Grande Industries, Inc. Gentlemen: On behalf of Rio Grande Industries, Inc. ("Rio Grande"), we request the
concurrence of the Staff with our conclusion that the transfer of the common
stock (the "Stock") and debentures (the "Debentures") of Santa Fe Southern
Pacific Corporation ("Santa Fe") from the Santa Fe Southern Pacific Savings and
Investment Plan for Salaried Employees (the "Santa Fe Plan") to the Thrift Plan,
Rio Grande Industries, Inc. (the "Rio Grande Plan"), under the circumstances
described below, will not constitute a "sale" of securities by an affiliate of
Santa Fe and, consequently, that the status of the Stock and Debentures as
unrestricted securities in the Santa Fe Plan will be unchanged when the
Securities are held in the Rio Grande Plan. The Stock and Debentures will be
referred to herein collectively as the "Securities." We have based our conclusion on the premise that the transfer of the Securities
under the circumstances described below does not constitute a "sale" of the
Securities, as that term is defined in Section 2(3) of the Securities Act of
1933 (the "33 Act") and that the transfer involved is a transfer of Securities
for the accounts of the participants in the Santa Fe Plan (who are the
beneficial owners of the Securities), rather than a transfer for the account of
the Santa Fe Plan or its administrators, who may be deemed affiliates of Santa
Fe. BACKGROUND Rio Grande has entered into an agreement with Santa Fe pursuant to which a
subsidiary of Rio Grande, SPTC Holding, Inc., will acquire all of the stock of
Southern Pacific Transportation Company ("Southern Pacific") from a subsidiary
of Santa Fe. Employees and former employees of Southern Pacific and certain of
its subsidiaries are participants (the "Participants") in the Santa Fe Plan. The Santa Fe Plan provides for deferred and non-deferred contributions by such
employees. Deferred contributions are not subject to federal income taxes at the
time they are paid into the Santa Fe Plan, while non-deferred contributions are
subject to such tax. In addition, the employers with employees who are
participating in the Santa Fe Plan make additional contributions, the amount of
which is based on the employees' deferred contributions (within limits
prescribed by the plan) and available income. Santa Fe intends that the Santa Fe
Plan satisfy the qualification and exemption requirements of Sections 401(a) and
501(a) of the Internal Revenue Code. Participants in the Santa Fe Plan are entitled to have their contributions, and
those of their employer, invested in one of four accounts maintained by an
insurance company, currently Travelers Insurance Company ("Travelers"), under
contract with Santa Fe. The funds include a fixed income fund, an equity fund, a
stock fund consisting of the Stock and a debenture fund consisting of the
Debentures. All employer contributions are made in cash; no direct contributions
of Stock are permitted. Travelers acquires Stock for the Stock fund in the open
market at such prices and times, and using such brokers, as Travelers chooses in
its sole discretion. The Debenture fund consists of Debentures issued by Santa
Fe as a distribution to its stockholders. All decisions concerning the investment of employee and employer contributions
in the various funds, and the transfer of assets within a Participant's account
from one fund to another, are made by the Participant. No such decisions are
made by the Santa Fe Plan administrators. Travelers votes the shares of Stock held in the Stock fund only in accordance
with the directions of the Participants, except that Travelers votes those
shares of Stock for which it has not received voting instructions, fractional
shares and shares held by Travelers pending allocation to Participants' Stock
accounts in the same proportion as the shares for which voting instructions have
been received have been voted. In the event of a tender offer or exchange offer involving the Stock, each
Participant has the right to instruct Travelers as to the manner in which to
respond. If no instructions are received, the Participant will be deemed to have
rejected the tender offer or exchange offer. Unallocated shares of Stock are to
be tendered or exchanged in the same proportion as are shares with respect to
which Participants have the right of direction. Withdrawals from the Santa Fe Plan may be made by a Participant prior to
termination of employment, subject to certain restrictions with respect to the
order of withdrawal from the Participant's deferred, non-deferred and employer
contribution accounts and certain other restrictions contained in the Santa Fe
Plan. Upon termination of employment by reason of death, disability or
retirement, the Participant is entitled to the full value of his account. Upon
termination for any other reason, the Participant is entitled to the full value
of his account except for unvested employer contributions. Distributions in any of the events described in the above paragraph may be made,
at the election of the Participant, either in cash (or, if the Participant has
terminated employment, by purchase of an annuity), or by distribution of
Securities held in the Participant's Stock or Debenture account. The Santa Fe Plan is administered by the Employee Benefits Committee of Santa
Fe, which consists of individuals employed by Santa Fe and its subsidiaries,
some of whom are officers of Santa Fe. Committee members are appointed by and
serve at the pleasure of the Chief Executive Officer of Santa Fe. The committee
is empowered to establish rules and regulations for the administration of the
Santa Fe Plan and determine all questions arising under the plan with respect to
the construction and interpretation of its provisions, including determination
of the rights and eligibility of employees, Participants and beneficiaries. In connection with the acquisition of Southern Pacific by Rio Grande, all
assets, including the Securities held in the Santa Fe Plan for the accounts of
employees or former employees of Southern Pacific and its subsidiaries are to be
transferred to the Rio Grande Plan. The Rio Grande Plan contains provisions
substantially the same as those provisions in the Santa Fe Plan related to
investment options, voting rights and withdrawal, except that no contributions
may be invested in the Stock or Debenture fund, no amounts may be transferred to
the Stock or Debenture fund from any other fund and no amounts may be
transferred from the Debenture fund to the fixed-income fund. We have been advised by Santa Fe that the shares of Stock held in the Santa Fe
Plan do not constitute "restricted securities" as that term is used in Rule 144
promulgated under the 33 Act because they were acquired in the open market by
Travelers for the accounts of Participants and that the Debentures held in the
Santa Fe Plan do not constitute restricted securities because they were acquired
pursuant to a distribution to holders of unrestricted Stock. ANALYSIS The transfer of Santa Fe Plan assets, including the Securities, from the Santa
Fe Plan to the Rio Grande Plan does not involve a "sale" as that term is defined
in Section 2(3) of the 33 Act and used in Rule 144. Section 2(3) provides, in
relevant part, that the term "sale" shall include "every contract of sale or
disposition of a security or interest in a security, for value" (emphasis
added). The transfer involves only a change in nominal ownership of the
Securities, which are owned beneficially by the Participants as explained below. Even if the transfer were to be deemed a sale, the transfer would be for the
benefit of beneficial owners of the Securities, rather than for the benefit of
the Santa Fe Plan or its administrators, who may be considered affiliates of
Santa Fe. Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the "34 Act")
provides that a beneficial owner, for purposes of Sections 13(d) and 13(g) of
the 34 Act, "includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise has or shares:
(1) Voting power which includes the power to vote, or to direct the voting of,
such security; and/or (2) Investment power which includes the power to dispose,
or to direct the disposition of, such security." None of such powers are held by the administrators of the Santa Fe Plan, the
Plan itself or Travelers. With respect to voting of the Stock, Travelers may only vote the shares in
accordance with the directions of the Participants, except that shares held by
Participants for which no voting instructions have been given, fractional shares
held and shares held by Travelers pending allocation to Participant's Stock
accounts are voted by Travelers in the same proportion as shares for which
voting instructions have been received have been voted. No discretion concerning
the voting of shares of Stock is held by Travelers, the Santa Fe Plan or the
administrators of the Santa Fe Plan. The Staff concluded in Primark Corporation
Employees Savings Plan (available 10/23/87) that such voting arrangements were
sufficient to establish that neither the plan nor the trustee were beneficial
owners of the common shares for purposes of Sections 13(d) or 14(a) under the 34
Act. With respect to disposition of the Stock in a tender or exchange offer, the
Santa Fe Plan provides that Travelers must tender or exchange shares of Stock
held by Participants only when instructed to do so by such Participants. If not
so instructed with respect to shares of Stock held by Participants, Travelers
may not tender or exchange such shares. Unallocated shares of Stock are to be
tendered or exchanged by Travelers in the same proportion as are shares for what
instructions may be given. Neither the Santa Fe Plan, its administrators nor
Travelers has any discretion with respect to such matters. Other acquisitions or
dispositions of shares of Stock are made by Travelers only as the result of
decisions made by Participants in the Santa Fe Plan. REQUESTED ACTION We request that the Staff concur in our opinion that the transfer of Santa Fe
Securities from the Santa Fe Plan to the Rio Grande Plan will not involve a sale
of the Securities by an affiliate of Santa Fe. Consequently, the Securities,
which are not restricted securities while held in the Santa Fe Plan, will not
become restricted securities when they are received by the Rio Grande Plan and
the Securities can be sold by the Rio Grande Plan trustee without restrictions
or sold by the participants in the Rio Grande Plan, upon receipt of such
securities as a distribution from the Plan, without regard to the Rule 144
restrictions on the sale of restricted securities. We recognize that if any
holder of the Securities is an affiliate of Santa Fe (which is unlikely), such
holder would be subject to the transfer restrictions imposed by Rule 144 other
than the holding period requirement. Very truly yours, Thomas A. Richardson TAR:dp
Encl.
BY6/TARC
[INQUIRY LETTER 2]
Holme Roberts & Owen
Denver Technological Center, Suite 900, 8400 East Prentice Avenue
Englewood, Colorado 90111
TELEPHONE(303) 796-7005 December 14, 1988 FEDERAL EXPRESS Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549 ATTENTION: Karen Kiese Re: Rio Grande Industries, Inc. Gentlemen: This letter is a supplement to our letter to the Staff dated October 12, 1988.
In that letter, we requested the concurrence of the Staff with our conclusion
that the transfer of the common stock (the "Stock") and debentures (the
"Debentures") of Santa Fe Southern Pacific Corporation ("Santa Fe") from the
Santa Fe Southern Pacific Savings and Investment Plan for Salaried Employees
(the "Santa Fe Plan") to the Thrift Plan, Rio Grande Industries, Inc. (the "Rio
Grande Plan") will not constitute a "sale" of securities by the Santa Fe Plan,
which may be an affiliate of Santa Fe and, consequently, that the status of the
Stock and Debentures as unrestricted securities in the Santa Fe Plan will be
unchanged when such securities are held in the Rio Grande Plan. The Staff has requested that we provide additional authority for our conclusions
that the transfer of the Stock and Debentures does not constitute a "sale" for
securities law purposes and that the Stock and Debentures held in the Santa Fe
Plan are "unrestricted securities." NO SALE In the Securities and Exchange Commission's most significant release on the
applicability of the Securities Act of 1933 (the "33 Act") to employee benefit
plans (Release No. 33-6188, February 1, 1980), the Staff concluded that a sale
of securities exists in an employee benefit plan context when there is both an
investment decision and the furnishing of value by participating employees. The
Staff then concluded that, consistent with this view, it did not believe that a
sale of a security occurs when an existing plan is converted into an employee
stock ownership plan ("ESOP") except when participants are given a choice in
this matter. The transfer which is the subject of our inquiry is to be made without any input
from the participants in the Santa Fe Plan. They will not be asked to make a
decision with respect to the transfer of assets in their plan accounts
(including the Stock and Debentures) to the Rio Grande Plan. The transfer was
approved by the Employee Benefits Committee of Santa Fe pursuant to their
administrative powers contained in the plan documents. The transfer of assets
from the Santa Fe Plan to the Rio Grande Plan, which is substantially similar to
the Santa Fe Plan, is a change which is less substantially than the change of an
existing non-ESOP to an ESOP. The absence of any investment decision by participants in the Santa Fe Plan
concerning the transfer of assets to the Rio Grande Plan indicates that no sale
of the assets has occurred for 33 Act purposes. UNRESTRICTED SECURITIES As stated in our October 12, 1988 letter, we have been advised by Santa Fe that
the Stock and Debentures held in the Santa Fe Plan are unrestricted securities,
as that term is used in Rule 144 promulgated under the 33 Act. The Stock held in
the Santa Fe Plan was acquired in the open market by Travelers Insurance Company
under contract with Santa Fe. Travelers acquire the Stock at such prices and
times, and using such brokers, as Travelers chose in its sole discretion. As
indicated in footnote 165 to Release No. 33-6188, a purchase of securities in
the open market from persons who are not underwriters would be a transaction
exempt from the registration requirements of Section 5 of the 33 Act pursuant to
Section 4(1) of the 33 Act. That exemption applies to transactions not involving
an issuer, underwriter or dealer. The Staff has recognized that securities purchased in the open market by an
employee benefit plan trustee do not constitute restricted securities. See,
Motorola, Inc., March 25, 1985. We would greatly appreciate your prompt response to our request. If you have
additional questions, please call the undersigned at (303) 796-7005. Thank you
for your assistance. Very truly yours, Thomas A. Richardson TAR:dp
Encl.
CDO/TARC
[INQUIRY LETTER 3]
Holme Roberts & Owen
Denver Technological Center, Suite 900, 8400 East Prentice Avenue
Englewood, Colorado 80111
TELEPHONE(303) 796-7005 March 10, 1989 Mr. Richard Baltz
Securities and Exchange Commission
450 Fifth Street N.W., Room 3056
Washington, D.C. 20549 Re: Southern Pacific Transportation Company Dear Mr. Baltz: Pursuant to our telephone conversion on February 22, I am enclosing a copy of
The Santa Fe Southern Pacific Savings and Investment Plan for Salaried
Employees. Also, pursuant to your request, I have determined that as of October 31, 1988,
Santa Fe Southern Pacific Corporation had 157,346,000 shares of common stock
outstanding, of which approximately 2,100,000 shares were held in the Santa Fe
Southern Pacific Plan for the benefit of Southern Pacific employees and another
approximately 1,300,000 shares were held in such plan for the benefit of Santa
Fe employees. The combined ownership of Santa Fe stock by the accounts of the
two employee groups constituted approximately 2% of the Santa Fe common stock
outstanding. As such totals indicate, there is no current possibility that any
Schedule 13D or 13G filing issues will arise concerning either the Santa Fe or
Rio Grande benefit plans with respect to their holding of Santa Fe Southern
Pacific Corporation common stock. If you need any other information to complete the Staff's review of our no
action request contained in our letter dated October 12, 1988 as supplemented by
our letter dated December 14, 1988, please let me know. Very truly yours, Thomas A. Richardson TAR:dp
Encl.
CFO/TARC
[STAFF REPLY LETTER]
April 5, 1989 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: Rio Grande Industries, Inc. (the "Company")
Incoming letters dated October 12, 1988,
December 14, 1988, and March 10, 1989 Based on the facts presented, the Division will not recommend any enforcement
action to the Commission if the Stock and Debentures of Santa Fe Southern
Pacific Corporation ("Santa Fe") held in the Santa Fe Plan, in reliance on your
opinion as counsel that registration is not required, are transferred to the
Company's Thrift Plan without compliance with the registration provisions of the
Securities Act of 1933 ("1933 Act"). With respect to your question regarding resales of Santa Fe Stock and Debentures
which the Trustee purchased in open market transactions, the Division is of the
view that such securities are not "restricted" as defined in Rule 144 under the
1933 Act and are not subject to the holding period requirement. Whether the
trustee would be subject to the other requirements of Rule 144 depends upon its
affiliate status. Since status as an affiliate is based on facts and
circumstances, we are unable to express any view regarding such resales. Finally, with respect to the reporting of beneficial ownership for the purposes
of Sections 13(d) and 14(a) of the Securities Exchange Act of 1934, the staff
does not concur that the Trustee is not the beneficial owner of shares which are
not allocated to the participants' accounts. In reaching this conclusion, the
staff has been informed by the U.S. Department of Labor, Pension and Welfare
Benefits Administration ("DOL"), that it has advised plan trustees of the
principles described below with respect to plan provisions prescribing methods
by which a plan trustee shall vote proxies on matters or dispose of shares of
stock held by the plan. The application of these principles to a trustee's
ability to vote and/or dispose of shares determines beneficial ownership. Many plans include provisions passing through both voting and tendering
decisions with respect to allocated and unallocated shares to plan participants
by providing that unallocated shares, and, in some cases, allocated shares for
which no instructions have been received, are to be voted, or disposed of, by
the plan trustee in the same ratio as the allocated shares for which
instructions have been received. DOL has expressed the view that under ERISA
Section 403(a) a plan may grant a participant the authority to direct trustees
with respect to the tendering of allocated shares. The power to vote allocated
shares must be passed through to participants with respect to publicly traded
securities. The trustee must follow such instructions, subject to the
participant's directions being both proper and made in accordance with the plan
terms, as well as not being contrary to the provisions of ERISA. However, the
trustee would be responsible for assuring that the participants receive
necessary and accurate information in order to allow them to be fully informed
on the matters, and, if the participants are subjected to undue pressure in
making their decisions, for ignoring the participant directions. Notwithstanding
these contingent responsibilities imposed on the trustee by ERISA and the
ministerial actions of the trustee in executing the participant's instructions,
the staff would not object if a trustee did not report beneficial ownership for
the purpose of Sections 13(d) and 14(a) with respect to the allocated shares.
See, e.g., letter to Primark Corporation Employees' Savings Plan (available
October 23, 1987). With respect to plan provisions directing the vote or disposition of unallocated
or non-voted allocated shares, DOL has indicated that such decisions are the
exclusive responsibility of the plan trustee who must exercise prudence in
determining whether to vote or tender those shares, notwithstanding the plan
provisions. When a conflict between the prudence standard and plan provisions
occurs, ERISA Section 404(a)(1)(D) requires that the plan provisions give way to
the statutory requirements. Thus, the trustee has voting and/or investment power
over these shares and is the beneficial owner of these shares. Because these positions are based upon the representations made to the Division
in your letters, it should be noted that any different facts or conditions might
require a different conclusion. Furthermore, this letter only expresses the
Division's position on enforcement action and does not purport to express any
legal conclusion on the questions presented. Sincerely, Felicia Smith
Attorney-Adviser
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