<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/XX/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ________
Commission file number 1-6324
BURLINGTON NORTHERN RAILROAD COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-6034000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(817) 333-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
-----------------------------------------------------------
The securities listed below are registered on the New York Stock Exchange.
Title of each class
-------------------
Burlington Northern Inc. Northern Pacific Railway Company
(Now Burlington Northern Railroad Company) Prior Lien Railway and Land
Consolidated Mortgage Bonds Grant 4% Bonds, due 1997
9 1/4 %, Series H, due 2006 General Lien Railway and Land
10%, Series J, due 1997 Grant 3% Bonds, due 2047
6.55%, Series K, due 2020
3.80%, Series L, due 2020 Great Northern Railway Company
3.20%, Series M, due 2045 General Mortgage Bonds
8.15%, Series N, due 2020 3 1/8%, Series O, due 2000
6.55%, Series O, due 2020 2 5/8%, Series Q, due 2010
8.15%, Series P, due 2020
St. Louis-San Francisco Railway
Company
First Mortgage Bonds, 4%,
Series A, due 1997
Income Debentures, 5%,
Series A, due 2006
<PAGE> 2
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
-----------------------------------------------------------
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months [or for such shorter period that the
registrant was required to file such reports], and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Class Outstanding
----- -----------
Common Stock, without par value
as of January 31, 1994* 1,000 shares
*Burlington Northern Railroad Company is a wholly owned subsidiary of
Burlington Northern Inc. (BNI) and there is no market data with respect to
such shares.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED
DISCLOSURE FORMAT PERMITTED BY GENERAL INSTRUCTION J.
<PAGE> 3
Table of Contents
-----------------
Item Page
---- ----
Part I 1. Business.......................................... 1
2. Properties........................................ 1
3. Legal Proceedings................................. 8
4. Submission of Matters to a Vote of Security
Holders......................................... 9
Part II 5. Market for the Registrant's Common Equity and
Related Stockholder Matters..................... 9
6. Selected Financial Data........................... 9
7. Management's Narrative Analysis of Results of
Operations...................................... 10
8. Financial Statements and Supplementary Data....... 17
9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure............. 36
Part III 10. Directors and Executive Officers of the Registrant 36
11. Executive Compensation............................ 36
12. Security Ownership of Certain Beneficial Owners
and Management.................................. 36
13. Certain Relationships and Related Transactions.... 36
Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................. 36
NOTE: Part I, Item Four; Part II, Item Six; Part III, Items Ten, Eleven,
Twelve and Thirteen; and Part IV Exhibit 22 have been omitted
pursuant to General Instruction J(1)(a) and (b) of Form 10-K relating
to wholy owned subsidaries.
<PAGE> 4
PART I
ITEM 1. BUSINESS
AND
ITEM 2. PROPERTIES
Burlington Northern Railroad Company's (Railroad) principal business
activity is railroad transportation. Railroad is the principal subsidiary of
Burlington Northern Inc. (BNI).
RAILROAD TRANSPORTATION
Railroad operates the largest railroad system in the United States based on
miles of road and second main track, with approximately 24,500 total miles at
December 31, 1993. The principal cities served include Chicago,
Minneapolis-St. Paul, Fargo-Moorhead, Billings, Spokane, Seattle, Portland,
St. Louis, Kansas City, Des Moines, Omaha, Lincoln, Cheyenne, Denver, Fort
Worth, Dallas, Houston, Galveston, Tulsa, Wichita, Springfield (Missouri),
Memphis, Birmingham, Mobile and Pensacola.
During 1993, Railroad refined its customer oriented business units by
creating smaller, more focused business units. The following table presents
Railroad's revenue information by business unit, and includes reclassification
of prior-year information to conform to current year presentation.
Percent of revenues was calculated before consideration of shortline
payments and other miscellaneous revenues. The principal contributors to
rail transportation revenues were as follows (revenues and revenue ton miles
in millions, carloadings in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Coal:
Revenues................................ $ 1,532 $ 1,520 $ 1,554
Percent of revenues..................... 32% 32% 33%
Revenue ton miles....................... 122,832 117,139 119,028
Revenues per revenue ton mile........... 1.25cents 1.30cents 1.31cents
Carloadings............................. 1,468 1,448 1,472
Agricultural Commodities:
Revenues................................ $ 784 $ 777 $ 778
Percent of revenues..................... 16% 16% 17%
Revenue ton miles....................... 35,451 36,831 38,123
Revenues per revenue ton mile........... 2.21cents 2.11cents 2.04cents
Carloadings............................. 423 454 450
Intermodal:
Revenues................................ $ 730 $ 711 $ 687
Percent of revenues..................... 15% 15% 15%
Revenue ton miles....................... 23,726 22,749 22,191
Revenues per revenue ton mile........... 3.08cents 3.13cents 3.10cents
Carloadings............................. 1,003 1,017 1,018
Forest Products:
Revenues................................ $ 483 $ 489 $ 469
Percent of revenues..................... 10% 10% 10%
Revenue ton miles....................... 19,724 20,030 18,747
Revenues per revenue ton mile........... 2.45cents 2.44cents 2.50cents
Carloadings............................. 280 283 278
</TABLE>
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<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Chemicals:
Revenues................................ $ 405 $ 388 $ 346
Percent of revenues..................... 8% 8% 7%
Revenue ton miles....................... 14,625 14,142 12,952
Revenues per revenue ton mile........... 2.77cents 2.74cents 2.67cents
Carloadings............................. 262 244 218
Consumer Products:
Revenues................................ $ 257 $ 258 $ 250
Percent of revenues..................... 5% 5% 5%
Revenue ton miles....................... 9,052 9,098 8,879
Revenues per revenue ton mile........... 2.84cents 2.84cents 2.82cents
Carloadings............................. 145 146 141
Minerals Processors:
Revenues................................ $ 195 $ 180 $ 184
Percent of revenues..................... 4% 4% 4%
Revenue ton miles....................... 7,982 7,410 7,625
Revenues per revenue ton mile........... 2.44cents 2.43cents 2.41cents
Carloadings............................. 178 170 163
Iron & Steel:
Revenues................................ $ 172 $ 178 $ 170
Percent of revenues..................... 4% 4% 4%
Revenue ton miles....................... 8,178 8,086 7,615
Revenues per revenue ton mile........... 2.10cents 2.20cents 2.23cents
Carloadings............................. 225 244 238
Vehicles & Machinery:
Revenues................................ $ 187 $ 166 $ 166
Percent of revenues..................... 4% 4% 3%
Revenue ton miles....................... 2,416 2,165 2,209
Revenues per revenue ton mile........... 7.74cents 7.67cents 7.51cents
Carloadings............................. 123 101 102
Aluminum, Non-Ferrous Metals & Ores:
Revenues................................ $ 103 $ 108 $ 103
Percent of revenues..................... 2% 2% 2%
Revenue ton miles....................... 3,919 4,180 3,632
Revenues per revenue ton mile........... 2.63cents 2.58cents 2.84cents
Carloadings............................. 68 71 69
</TABLE>
COAL
The transportation of coal is Railroad's largest source of revenues,
accounting for approximately one-third of the total. Based on carloadings and
tons hauled, Railroad is the largest transporter of Western low-sulfur coal in
the United States. Over 90 percent of Railroad's coal traffic originated in
the Powder River Basin of Montana and Wyoming during the three years ended
December 31, 1993. These coal shipments were destined for coal-fired electric
generating stations primarily in the North Central, South Central and Mountain
regions of the United States with smaller quantities exported.
Railroad also handles increasing amounts of low-sulfur coal from the Powder
River Basin for delivery to markets in the eastern and southeastern portion of
the United States. The low-sulfur coal from the Powder River Basin is
abundant, inexpensive to mine and clean-burning. Since the Clean Air Act of
1990 requires power plants to reduce harmful emissions either by burning coal
with a lower sulfur content or by installing expensive scrubbing units,
opportunities for increased shipments of this low-sulfur coal still exist.
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AGRICULTURAL COMMODITIES
Based on carloadings and tons hauled, Railroad is the largest rail
transporter of grain in North America. Railroad's system is strategically
located to serve the Midwest and Great Plains grain producing regions where
Railroad serves most major terminal, storage, feeding and food-processing
locations. Additionally, Railroad has access to major export markets in the
Pacific Northwest, western Great Lakes and Texas Gulf regions as well as
direct entry to consuming markets in southern Mexico through its Protexa
Burlington International affiliate.
INTERMODAL
Intermodal transportation moves traffic on specially designed flatcars or
doublestack equipment which competes with motor carriers. Railroad's
intermodal transportation system integrates the movement of approximately 46
daily trains operating between 30 rail hubs and 28 satellite rail hubs
(Railroad-operated marshalling points for trailer/container movements). These
operations are strategically located across Railroad's rail network and also
serve major distribution centers outside Railroad's system. Strategic
alliances have been formed to enhance Railroad's market access both with other
railroads and with major truck transportation providers.
FOREST PRODUCTS
The Forest Products business unit is primarily comprised of lumber, plywood,
pulpmill feedstock, wood pulp and paper products. These products primarily
come from the Pacific Northwest, upper Midwest and Southeast areas of the
United States.
CHEMICALS
The Chemicals business unit is comprised of fertilizer, petroleum and
chemical commodities as well as Railroad's environmental logistics business.
Primary origin markets for Railroad include the Gulf Coast, the Pacific
Northwest, and various Canadian ports of entry. Environmental logistics is an
area of significant opportunity as municipalities exhaust their traditional
disposal sources and must increasingly transport their waste longer distances.
CONSUMER PRODUCTS
Products included in Railroad's Consumer Products business unit represent a
wide variety of commodities. Some of the major products in this group are
food products, beverages, frozen foods, canned foods, appliances and
electronics. Because this business unit handles a wide variety of consumer
goods, the business unit performance typically mirrors the country's economy.
MINERALS PROCESSORS
Commodities in this group include clays, cements, sands and other minerals
and aggregates. This group services both the oil and construction industries.
IRON & STEEL
The Iron & Steel business unit handles virtually all of the commodities
included in or resulting from the production of steel. Taconite, an iron ore
derivative produced in northern Minnesota, scrap steel and coal coke are the
business unit's primary input products, while finished steel products range
from structural beams and coil to wire and nails.
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<PAGE> 7
VEHICLES & MACHINERY
The Vehicles & Machinery business unit is responsible for both domestic and
international vehicle manufacturers as well as an assortment of primary and
secondary markets for heavy machinery. Through the development and
implementation of Autostack technology (using containers to move motor
vehicles), Railroad is redefining transit time and ride quality. Heavy
machinery includes primary markets for aircraft, construction, farm and
railroad equipment and secondary markets for used equipment. The business
unit is also responsible for military and other miscellaneous traffic for the
United States government.
ALUMINUM, NON-FERROUS METALS & ORES
The Aluminum, Non-Ferrous Metals & Ores business unit handles alumina and
aluminum products, petroleum coke and a variety of other metals and ores such
as zinc, copper and lead.
OPERATING FACTORS
Certain significant operating statistics were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------
1993 1992 1991 1990 1989*
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Carloadings (in thousands)........................ 4,175 4,178 4,149 4,335 4,215
Freight revenues per carload...................... $1,099 $1,080 $1,071 $1,052 $1,063
Revenue ton miles (in millions)................... 237,339 232,799 232,441 234,291 232,527
Revenues per revenue ton mile..................... 1.98cents 1.99cents 1.96cents 1.99cents 1.98cents
Revenue tons per carload.......................... 83 82 82 79 75
Revenue tons per train............................ 3,315 3,193 3,188 3,141 3,032
Freight train miles (in millions)................. 72 73 73 75 77
Average length of haul (miles).................... 778 764 770 766 783
Gross ton miles, excluding locomotives
(in millions)................................... 409,808 400,917 402,527 409,991 395,878
Operating ratio (excluding the 1991 special
charge)......................................... 86% 87% 90% 87% 86%
Operating expense per gross ton mile (excluding
the 1991 special charge)........................ .99cents 1.01cents 1.02cents .99cents 1.00cents
Gallons of fuel used (in millions)................ 588 560 562 593 591
Average fuel price per gallon..................... 61.5cents 62.2cents 65.5cents 69.5cents 55.5cents
Gross ton miles per gallon of fuel used........... 697 716 716 691 670
Revenue ton miles per employee (in thousands)..... 7,781 7,461 7,317 7,120 7,060
Revenues per employee (in thousands).............. $154 $148 $144 $142 $140
<FN>
*Beginning in 1990, Railroad reduced revenues and mileage for the effects of shortline railroads,
which complete hauls for Railroad. In prior years, payments to shortline railroads were classified
in operating expenses.
</TABLE>
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<PAGE> 8
PROPERTIES
In 1993, approximately 96 percent of the total ton miles, both revenue and
non-revenue generating, carried by Railroad were handled on its main lines.
At December 31, 1993, approximately 18,828 miles of Railroad's track consisted
of 112-lb. per yard or heavier rail, including approximately 10,461 track
miles of 132-lb. per yard or heavier rail. Additions and replacements to
properties were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Track miles of rail additions and replacements:
New.......................................... 387 461 380 301 326
Used......................................... 356 299 281 299 208
Track miles surfaced or reballasted............ 7,854 7,610 7,710 7,119 6,974
Ties inserted (in thousands):
Wood......................................... 1,914 1,684 1,515 1,331 1,342
Concrete..................................... 195 500 527 691 651
</TABLE>
Equipment
Railroad owned or leased, under both capital and operating leases, with an
initial lease term in excess of one year, the following units of railroad
rolling stock at December 31, 1993:
Number of Units
-------------------------
Owned Leased Total
Locomotives: ----- ------ -----
Freight...................................... 581 1,334 1,915
Passenger.................................... - 2 2
Multi-purpose................................ 151 58 209
Switching.................................... 176 18 194
------ ------ ------
Total locomotives.......................... 908 1,412 2,320
====== ====== ======
Freight Cars:
Box-general purpose.......................... 776 2,813 3,589
Box-specially equipped....................... 4,587 689 5,276
Gondola...................................... 4,811 2,013 6,824
Hopper-open top.............................. 7,744 1,210 8,954
Hopper-covered............................... 16,528 12,640 29,168
Refrigerator................................. 3,347 9 3,356
Flat......................................... 3,280 494 3,774
Caboose...................................... 498 - 498
Other........................................ 552 7 559
------ ------ ------
Total freight cars......................... 42,123 19,875 61,998
====== ====== ======
Commuter passenger cars........................ - 141 141
====== ====== ======
In addition to the owned and leased locomotives identified above, Railroad
operates 199 freight locomotives under power purchase agreements.
The average age of locomotives and freight cars was 14.5 years and 18.6
years, respectively, at December 31, 1993, compared with 13.5 years and 18.4
years, respectively, at December 31, 1992.
The average percentage of Railroad's locomotives and freight cars awaiting
repairs during 1993 was 7.4 and 3.3, respectively, compared with 7.4 and 4.1,
respectively, in 1992. The average time between locomotive failures was 67.9
days in 1993 compared with 71 days in 1992.
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<PAGE> 9
During 1993, Railroad entered into an agreement to acquire 350
new-technology alternating current traction motor locomotives. Railroad
anticipates reduced locomotive operating costs as well as an increase in both
horsepower and traction, meaning fewer locomotives will be needed for many
freight operations. Railroad accepted delivery of one locomotive during 1993
and anticipates delivery of between approximately 60 and 100 each year from
1994 through 1997.
EMPLOYEES
Railroad employed an average of 30,502 employees in 1993 compared with
31,204 in 1992 and 31,760 in 1991. Railroad's payroll and employee benefits
costs, including capitalized labor costs, were approximately $1.9 billion for
each of the years ended December 31, 1993, 1992 and 1991. Almost 90 percent
of Railroad's employees are covered by collective bargaining agreements with
14 different labor organizations.
In October 1991, Railroad entered into an agreement (Crew Consist Agreement
No. 1) with the United Transportation Union (UTU) covering the southern
portion of Railroad's system. Crew Consist Agreement No. 1 provided for crews
on most through-freight trains to consist of one conductor and one engineer
and for crews on all other trains to consist of one brakeman, one conductor
and one engineer.
Under the terms of Crew Consist Agreement No. 1, Railroad offered the
opportunity for voluntary separation from employment in return for severance
payments of up to $60,000 per employee. Remaining conductors or brakemen who,
as a result of Crew Consist Agreement No. 1, were unable to hold a position in
active service, due to relative seniority, were placed on a reserve board.
Employees in reserve status received compensation at a rate equal to either 75
percent of their previous 12-month earnings, or 75 percent of the basic
five-day yard helper rate of pay, whichever is greater, and are required to be
available for return to active service on 15 days' notice. Each UTU member on
the southern portion of Railroad's system received a lump-sum payment of
$1,000 upon ratification of Crew Consist Agreement No. 1.
In May 1993, Railroad entered into an agreement (Crew Consist Agreement No.
2) with the UTU covering approximately 3,400 UTU members in the northern
portion of Railroad's system. Crew Consist Agreement No. 2 provides for crews
on most through-freight trains to consist of one conductor and one engineer
and for crews on all other trains to consist of one brakeman, one conductor
and one engineer. It is similar to Crew Consist Agreement No. 1, covering the
southern portion of Railroad's system. Each UTU member on the northern
portion of Railroad's system received a one-time lump-sum payment of $5,000,
pursuant to Crew Consist Agreement No. 2.
Under the terms of Crew Consist Agreement No. 2, Railroad offered the
opportunity for voluntary separation from employment in return for severance
payments of up to $80,000 per employee. Conductors and brakemen who choose
not to accept the voluntary separation offer can elect volunteer surplus
status pursuant to which they will receive $60,000 to be paid out over a
period of 18 to 48 months, as each selects. If such employee has not been
recalled to active service by the time such payments cease upon expiration of
the selected period, such employee will remain in volunteer surplus status,
without further compensation or benefits, until recalled to active service.
Employees in volunteer surplus status may be called back to service only after
the individuals in reserve status, within their own subdivided seniority
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<PAGE> 10
district, have been recalled. Remaining conductors and brakemen who, as a
result of Crew Consist Agreement No. 2, are not needed in train service, and
who do not elect one of the above severance options, will be placed on a
reserve board.
Employees in reserve status will receive compensation equal to either 75
percent of their previous 12-month earnings, or 75 percent of the basic
five-day yard helper rate of pay, whichever is greater, and are required to be
available for return to active service on 15 days' notice.
In October 1993, the UTU elected to adopt Crew Consist Agreement No. 2 for
those southern portion UTU members who were previously covered by Crew Consist
Agreement No. 1. Crew Consist Agreement No. 2 was implemented on the southern
portion of the Railroad's system during the fourth quarter of 1993. Upon
implementation, each of the approximately 3,300 UTU members on the southern
portion of Railroad's system received a one-time lump-sum payment of $4,000,
which was the incremental difference between the $1,000 lump-sum payment
received following ratification of Crew Consist Agreement No. 1 and the amount
received by UTU members following adoption of Crew Consist Agreement No. 2.
Railroad will continue to remove excess positions from train service through
the implementation of Crew Consist Agreement No. 2. Approximately 1,350
excess positions have been removed as a result of employees accepting
severance or voluntary surplus payments. Other excess positions have been
eliminated and personnel formerly in those positions have been assigned to
reserve boards, absorbed through additional train starts and/or utilized in
quality and safety initiatives. Based upon its experience under Crew Consist
Agreement No. 1, Railroad anticipates that the number of employees on reserve
status will decline over time.
In July 1993, the American Train Dispatchers Association ratified an April
agreement which will facilitate the consolidation of all dispatching functions
into a centralized train dispatching office in Fort Worth, Texas by the end of
1995.
COMPETITION
The general environment in which Railroad operates remains highly
competitive. Depending on the specific market, deregulated motor carriers,
other railroads and river barges exert pressure on various price and service
combinations. The presence of advanced, high service truck lines with
expedited delivery, subsidized infrastructure and minimal empty mileage
continues to impact the market for non-bulk, time sensitive freight. The
potential expansion of long combination vehicles could further encroach upon
markets traditionally served by railroads. In order to remain competitive,
Railroad and other railroads continue to develop and implement technologically
supported operating efficiencies to improve productivity.
As railroads streamline, rationalize and otherwise enhance their franchises,
competition among rail carriers intensifies. Railroad's primary rail
competitors in the western region of the United States consist of Atchison,
Topeka & Santa Fe Railway Company; Chicago & Northwestern Transportation
Company (C&NW); Southern Pacific Transportation Company; and Union Pacific
Railroad Company (UP). Coal, one of Railroad's primary commodities, has
experienced significant pressure on rates due to competition from the joint
effort of C&NW/UP and Railroad's efforts to penetrate into new markets. In
addition to the railroads discussed above, numerous regional railroads and
motor carriers operate in parts of the same territory served by Railroad.
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<PAGE> 11
ENVIRONMENTAL
Railroad's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. In order to
comply with such regulation and to be consistent with Railroad's corporate
environmental policy, Railroad's operating procedures include practices to
protect the environment. Amounts expended relating to such practices are
inextricably contained in the normal day-to-day costs of Railroad's business
operations.
ITEM 3. LEGAL PROCEEDINGS
WHEAT AND BARLEY TRANSPORTATION RATES
In September 1980 a class action lawsuit was filed against Railroad in
United States District Court for the District of Montana (District Court)
challenging the reasonableness of Railroad's export wheat and barley rates.
The class consists of Montana grain producers and elevators. The plaintiffs
sought a finding that Railroad's single car export wheat and barley rates for
shipments moving from Montana to the Pacific Northwest were unreasonably high
and requested damages in the amount of $64 million. In March 1981 the
District Court referred the rate reasonableness issue to the Interstate
Commerce Commission (ICC). Subsequently, the State of Montana filed a
complaint at the ICC challenging Railroad's multiple car rates for Montana
wheat and barley movements occurring after October 1, 1980.
The ICC issued a series of decisions in this case from 1988 to 1991. Under
these decisions, the ICC applied a revenue to variable cost test to the rates
and determined that Railroad owed $9,685,918 in reparations plus interest. In
its last decision, dated November 26, 1991, the ICC found Railroad's total
reparations exposure to be $16,559,012 through July 1, 1991. The ICC also
found that Railroad's current rates were below a reasonable maximum and
vacated its earlier rate prescription order.
Railroad appealed to the United States Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) those portions of the ICC's decisions
concerning the post-October 1, 1980 rate levels. Railroad's primary
contention on appeal was that the ICC erred in using the revenue to variable
cost rate standard to judge the rates instead of Constrained Market
Pricing/Stand Alone Cost principles. The limited portions of decisions that
cover pre-October 1, 1980 rates were appealed to the Montana District Court.
On March 24, 1992, the Montana District Court dismissed plaintiffs' case as
to all aspects other than those relating to pre-October 1, 1980 rates. On
February 9, 1993, the D.C. Circuit served its decision regarding the appeal of
the several ICC decisions in this case. The Court held that the ICC did not
adequately justify its use of the revenue to variable cost standard as
Railroad had argued and remanded the case to the ICC for further
administrative proceedings.
On July 22, 1993, the ICC served an order in response to the D.C. Circuits'
February 9, 1993 decision. In its order, the ICC stated it would use the
Constrained Market Pricing/Stand Alone Cost standards in assessing the
reasonableness of Railroad wheat and barley rates moving from Montana to
Pacific Coast ports from 1978 forward. The ICC assigned the case to the
Office of Hearings to develop a procedural schedule. The parties are now
engaged in discovery.
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<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable-see Table of Contents note.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the outstanding Common Stock of Railroad is owned of record by BNI
and therefore not traded on any market.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable-see Table of Contents note.
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<PAGE> 13
ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993 COMPARED WITH YEAR ENDED DECEMBER 31, 1992
Railroad had net income of $332 million for 1993 compared with net income of
$334 million for 1992. Results for 1993 included the effects of severe
flooding in the Midwest, most notably in the third quarter. The floods slowed
and often halted operations, forced extensive detours, increased car,
locomotive and crew costs and resulted in extensive rebuilding of damaged
track and bridges. Railroad estimated that the third quarter flooding reduced
revenues during 1993 by $44 million and increased operating expenses by $35
million, for a combined reduction of $79 million. Net income for 1993
included the retroactive effects of the Omnibus Budget Reconciliation Act of
1993 (the Act), which was passed into law during August 1993. The Act
increased the corporate federal income tax rate by one percent, effective
January 1, 1993, which reduced net income by $28 million through the date of
enactment. Railroad recognized a one-time, non-cash charge of $27 million to
income tax expense to adjust deferred taxes as of the enactment date and a
charge of $1 million to current income tax expense. Net income for 1992
included settlement payments received for the reimbursement of attorneys' fees
and costs incurred by Railroad in connection with litigation filed by Energy
Transportation Systems, Inc., and others, and reimbursement of a portion of
the amount paid by Railroad in settlement of that action. The pre-tax amount
recorded in other income (expense), net was approximately $47 million. Also
during 1992, Railroad's net income included a $21 million cumulative
effect of changes in accounting methods and a $17 million favorable tax
settlement with the Internal Revenue Service (IRS).
REVENUES
During 1993, Railroad refined its customer oriented business units by
creating smaller, more focused business units. The following table presents
Railroad's revenue information by business unit, and includes reclassification
of prior-year information to conform to current year presentation:
<TABLE>
<CAPTION>
Revenues Per
Revenues Revenue Ton Miles Revenue Ton Mile
--------------- ----------------- ------------------
1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------
(In Millions) (In Millions) (In Cents)
<S> <C> <C> <C> <C> <C> <C>
Coal................................. $1,532 $1,520 122,832 117,139 1.25 1.30
Agricultural Commodities............. 784 777 35,451 36,831 2.21 2.11
Intermodal........................... 730 711 23,726 22,749 3.08 3.13
Forest Products...................... 483 489 19,724 20,030 2.45 2.44
Chemicals............................ 405 388 14,625 14,142 2.77 2.74
Consumer Products.................... 257 258 9,052 9,098 2.84 2.84
Minerals Processors.................. 195 180 7,982 7,410 2.44 2.43
Iron & Steel......................... 172 178 8,178 8,086 2.10 2.20
Vehicles & Machinery................. 187 166 2,416 2,165 7.74 7.67
Aluminum, Non-Ferrous Metals & Ores.. 103 108 3,919 4,180 2.63 2.58
Shortlines and other................. (149) (145) (10,566) (9,031) - -
------ ------ ------- -------
Total................................ $4,699 $4,630 237,339 232,799 1.98 1.99
====== ====== ======= =======
</TABLE>
Coal revenues improved $12 million compared with 1992, primarily as a result
of increased traffic caused by a rise in the demand for electricity. Higher
revenues resulting from volume increases were partially offset by lower yields
arising from competitive pricing pressures in contract renegotiations, traffic
mix and other factors. Additionally, Railroad estimated lost coal revenues of
-10-
<PAGE> 14
approximately $35 million for the third quarter of 1993 as a result of
flood-related problems in July and August which interrupted service to several
utilities.
Agricultural Commodities revenues were $7 million higher than 1992 as
stronger yields were partially offset by lower volumes. Improved yields
resulted from a traffic mix with a greater portion of wheat traffic in 1993.
Stronger export demand, for high-quality wheat grown in regions served by
Railroad, contributed to a $74 million improvement in wheat revenues. Reduced
crop quality and production problems, stemming from poor planting and growing
conditions, resulted in lower corn volumes and produced a year-over-year
decline in corn revenues of $45 million.
Intermodal revenues were $19 million higher in 1993 compared with 1992. BN
AMERICA revenues in 1993 surpassed revenues in 1992 as a result of continued
escalating demand for containerized transportation and an increased demand for
intermodal service due generally to a shortage in truck capacity. As import
traffic expanded and shifted from ports in California to ports served by
Railroad in the Pacific Northwest, intermodal-international revenues
increased. Domestic trailer revenues declined as trailer traffic continued to
convert to containers, partially offsetting other Intermodal increases.
Chemicals revenues for 1993 were $17 million greater than in 1992.
Increased plastics shipments for existing customers led improvements in
overall Chemicals revenues. Environmental logistics and fertilizer traffic in
1993 surpassed 1992 levels, also contributing to the higher revenues for
Chemicals.
Revenues for Minerals Processors increased $15 million when compared with
1992. As drilling activity increased, export traffic for clays and aggregates
expanded, contributing to greater revenues in 1993 than in 1992. Glass
minerals and cement revenues exceeded 1992 levels. This increase was due to
expanded sand traffic, which also benefited from increased drilling activity,
and increased cement traffic, related to certain highway and airport
construction projects.
Vehicles & Machinery revenues were $21 million greater than in 1992. This
improvement was due in part to growth in production and sales of light
vehicles which increased domestic traffic volumes. A rise in demand for heavy
machinery also contributed to greater revenues. Yields increased in 1993
primarily as a result of a decline in the average length of haul.
Forest Products, Iron & Steel and Aluminum, Non-Ferrous Metals & Ores had
lower revenues in 1993 compared with 1992. Current year Forest Products
revenues were $6 million less than in 1992 because of reduced lumber traffic,
resulting from a weak timber industry market, which was partially offset by
increased particle and construction board traffic. Iron & Steel revenues
declined $6 million compared with 1992, primarily due to lower taconite
traffic caused by labor strikes at two large customers. Aluminum, Non-Ferrous
Metals & Ores revenues decreased by $5 million as aluminum production
declined. Revenues for Consumer Products were relatively flat compared with
1992.
EXPENSES
Total operating expenses for 1993 were $4,049 million compared with $4,043
million for 1992. Despite the adverse effects of the Midwest flooding on
operating expenses during the third quarter of 1993, Railroad's year-to-date
operating ratio improved one percentage point, to 86 percent, compared with 87
percent for 1992.
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<PAGE> 15
Compensation and benefits expenses for 1993 decreased $3 million compared
with 1992. Cost of living allowances for union employees were $24 million
lower during 1993 compared with 1992 due to timing differences of vesting
periods. Work force reductions and a decrease in railroad unemployment taxes
also lowered expenses in 1993. The majority of these savings were offset by
increases in incentive compensation, wages and salaries, and higher costs for
union health, welfare and life insurance benefits. Increased wages were
partially caused by a scheduled three percent basic wage increase effective
July 1993 and inefficiencies associated with the Midwest flooding during 1993.
Fuel expenses were $14 million higher during 1993 compared with 1992,
primarily due to weather-related reductions in fuel efficiency. Increased
fuel consumption due to higher traffic volume was substantially offset by the
decrease in the average price paid for diesel fuel, 61.5 cents per gallon in
1993 compared with 62.2 cents per gallon in 1992. Included in the 1993
average price per gallon is a 4.3 cents per gallon increase in the federal
fuel tax effective October 1, 1993, as part of the Omnibus Budget
Reconciliation Act of 1993. This increase added approximately $7 million to
expense in the fourth quarter.
Materials expenses for 1993 increased $5 million compared with 1992. The
combination of flood-related problems and a larger fleet size increased
materials costs for locomotive repairs. Also, safety and protective equipment
expenditures were higher due to continued emphasis of Railroad's safety
programs. Offsetting these increases were lower car materials expenses.
Equipment rents expenses were $15 million higher in 1993 compared with 1992
due to increases in both car-hire expenses and locomotive rentals. Increased
equipment rentals from an affiliate also contributed to this increase. A
reduction in car-hire expenses during the first half of 1993, due to improved
utilization of equipment, was more than offset by flood-related inefficiencies
which increased car-hire expenses during the second half of 1993.
Purchased services expenses for 1993 were $7 million higher than in 1992.
Contributing to this increase were cost increases for intermodal logistics,
training, moving and derailments. Lower trackage rights credits, which
reduces purchased services expenses, were received from the Southern Pacific
Transportation Company (SPTC) as the floods reduced SPTC volumes over Railroad
track. These increases were partially offset by decreases in contracted
locomotive repairs and consultant fees.
Depreciation expense for 1993 was $10 million higher compared with 1992
primarily due to an increase in the asset base.
The $42 million decrease in other operating expenses compared with 1992 was
primarily due to a $35 million decline in costs associated with personal
injury claims. Railroad has introduced a number of programs to improve worker
safety and counter increasing personal injury costs. Reductions in bad debt
expense and various other costs were partially offset by losses on property
retired due to flood damages and increased moving expenses.
Interest expense declined $17 million in 1993 compared with 1992. This
decline was mainly due to a lower average long-term debt balance outstanding
during 1993.
Other income (expense), net was $45 million lower in 1993 than in 1992. The
higher 1992 income was due to a first quarter net gain of $47 million for
payments and reimbursements received for the settlement of prior litigation.
This decline was partially offset by an increase in the net gain on property
dispositions in 1993 compared with 1992.
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<PAGE> 16
The effective tax rate was 42.4 percent for 1993 compared with 34.4 percent
for 1992. This increase resulted primarily from the retroactive increase,
effective January 1, 1993, in tax rates as part of the Omnibus Budget
Reconciliation Act of 1993. Excluding the retroactive effect of the tax rate
change on deferred tax balances at January 1, 1993, Railroad's effective tax
rate was 37.9 percent for 1993. Additionally, a favorable tax settlement with
the IRS reduced the 1992 effective tax rate by 3.1 percent.
Other matters
In October 1991, Railroad entered into an agreement (Crew Consist Agreement
No. 1) with the United Transportation Union (UTU) covering the southern
portion of Railroad's system. Crew Consist Agreement No. 1 provided for crews
on most through-freight trains to consist of one conductor and one engineer
and for crews on all other trains to consist of one brakeman, one conductor
and one engineer.
Under the terms of Crew Consist Agreement No. 1, Railroad offered the
opportunity for voluntary separation from employment in return for severance
payments of up to $60,000 per employee. Remaining conductors or brakemen who,
as a result of Crew Consist Agreement No. 1, were unable to hold a position in
active service, due to relative seniority, were placed on a reserve board.
Employees in reserve status received compensation at a rate equal to either 75
percent of their previous 12-month earnings, or 75 percent of the basic
five-day yard helper rate of pay, whichever is greater, and are required to be
available for return to active service on 15 days' notice. Each UTU member on
the southern portion of Railroad's system received a lump-sum payment of
$1,000 upon ratification of Crew Consist Agreement No. 1.
In May 1993, Railroad entered into an agreement (Crew Consist Agreement No.
2) with the UTU covering approximately 3,400 UTU members in the northern
portion of Railroad's system. Crew Consist Agreement No. 2 provides for crews
on most through-freight trains to consist of one conductor and one engineer
and for crews on all other trains to consist of one brakeman, one conductor
and one engineer. It is similar to Crew Consist Agreement No. 1, covering the
southern portion of Railroad's system. Each UTU member on the northern
portion of Railroad's system received a one-time lump-sum payment of $5,000,
pursuant to Crew Consist Agreement No. 2.
Under the terms of Crew Consist Agreement No. 2, Railroad offered the
opportunity for voluntary separation from employment in return for severance
payments of up to $80,000 per employee. Conductors and brakemen who choose
not to accept the voluntary separation offer can elect volunteer surplus
status pursuant to which they will receive $60,000 to be paid out over a
period of 18 to 48 months, as each selects. If such employee has not been
recalled to active service by the time such payments cease upon expiration of
the selected period, such employee will remain in volunteer surplus status,
without further compensation or benefits, until recalled to active service.
Employees in volunteer surplus status may be called back to service only after
the individuals in reserve status, within their own subdivided seniority
district, have been recalled. Remaining conductors and brakemen who, as a
result of Crew Consist Agreement No. 2, are not needed in train service, and
who do not elect one of the above severance options, will be placed on a
reserve board.
Employees in reserve status will receive compensation equal to either 75
percent of their previous 12-month earnings, or 75 percent of the basic
five-day yard helper rate of pay, whichever is greater, and are required to be
available for return to active service on 15 days' notice.
-13-
<PAGE> 17
In October 1993, the UTU elected to adopt Crew Consist Agreement No. 2 for
those southern portion UTU members who were previously covered by Crew Consist
Agreement No. 1. Crew Consist Agreement No. 2 was implemented on the southern
portion of the Railroad's system during the fourth quarter of 1993. Upon
implementation, each of the approximately 3,300 UTU members on the southern
portion of Railroad's system received a one-time lump-sum payment of $4,000,
which was the incremental difference between the $1,000 lump-sum payment
received following ratification of Crew Consist Agreement No. 1 and the amount
received by UTU members following adoption of Crew Consist Agreement No. 2.
Railroad will continue to remove excess positions from train service through
the implementation of Crew Consist Agreement No. 2. Approximately 1,350
excess positions have been removed as a result of employees accepting
severance or voluntary surplus payments. Other excess positions have been
eliminated and personnel formerly in those positions have been assigned to
reserve boards, absorbed through additional train starts and/or utilized in
quality and safety initiatives. Based upon its experience under Crew Consist
Agreement No. 1, Railroad anticipates that the number of employees on reserve
status will decline over time.
In July 1993, the American Train Dispatchers Association ratified an April
agreement which will facilitate the consolidation of all dispatching functions
into a centralized train dispatching office in Fort Worth, Texas by the end of
1995.
Since 1935, Railroad has participated in the national railroad retirement
system which is separate from the national social security system. Under this
system, an independent Railroad Retirement Board administers the determination
and payment of benefits to all railroad workers. Both Railroad and its
employees are subject to a tax on employee earnings which is above the normal
social security rate assessed to those who are employed outside the railroad
industry.
Personal injury claims, including work-related injuries to employees, are a
significant expense for the railroad industry. Employees of Railroad are
compensated for work-related injuries according to the provisions of the
Federal Employers' Liability Act (FELA). FELA's system of requiring finding
of fault, coupled with unscheduled awards and reliance on the jury system, has
resulted in significant increases in expense. The result has been a trend
during the last several years of significant increases in Railroad's personal
injury expense which reflects the combined effects of increasing medical
expenses, legal judgments and settlements. To improve worker safety and
counter increasing costs, Railroad has introduced a number of programs to
reduce the number of personal injury claims and the dollar amount of claims
settlements which helped reduce cost in 1993. If these efforts continue to be
successful, future expenses could be further reduced. The total amount of
personal injury expenses (including wage continuation payments) were $216
million, $253 million and $224 million in 1993, 1992 and 1991, respectively.
Railroad is also working with others through the Association of American
Railroads to seek changes in legislation to provide a more equitable program
for injury compensation in the railroad industry.
Railroad's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. In order to
comply with such regulation and to be consistent with Railroad's corporate
environmental policy, Railroad's operating procedures include practices to
protect the environment. Amounts expended relating to such practices are
inextricably contained in the normal day-to-day costs of Railroad's business
operations.
-14-
<PAGE> 18
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (Superfund) and certain other laws,
Railroad is potentially liable for the cost of clean-up of various
contaminated sites identified by the U.S. Environmental Protection Agency and
other agencies. Railroad has been notified that it is a potentially
responsible party (PRP) for study and clean-up costs at a number of sites and,
in many instances, is one of several PRPs. Railroad generally participates in
the clean-up of these sites through cost-sharing agreements with terms that
vary from site to site. Costs are typically allocated based on relative
volumetric contribution of material, the amount of time the site was owned or
operated, and/or the portion of the total site owned or operated by each PRP.
However, under Superfund and certain other laws, as a PRP, Railroad can be
held jointly and severally liable for all environmental costs associated with
a site.
Environmental costs include initial site surveys and environmental studies
of potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when Railroad's liability
for environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. Railroad conducts an ongoing environmental contingency analysis,
which considers a combination of factors, including independent consulting
reports, site visits, legal reviews, analysis of the likelihood of
participation in and ability to pay for clean-up by other PRPs, and historical
trend analysis.
Railroad is involved in a number of administrative and judicial proceedings
in which it is being asked to participate in the clean-up of sites
contaminated by material discharged into the environment. Railroad paid $27
million, $20 million and $21 million during 1993, 1992 and 1991, respectively,
relating to mandatory clean-up efforts, including amounts expended under
federal and state voluntary clean-up programs. At this time, Railroad expects
to spend approximately $120 million in future years to remediate and restore
these sites.
Liabilities for environmental costs represent Railroad's best estimates for
remediation and restoration of these sites and include asserted and unasserted
claims. Railroad's best estimate of unasserted claims was approximately $5
million as of the end of 1993. Although recorded liabilities include
Railroad's best estimates of all costs, without reduction for anticipated
recovery from insurance, Railroad's total clean-up costs at these sites
cannot be predicted with certainty due to various factors such as the extent
of corrective actions that may be required, evolving environmental laws and
regulations, advances in environmental technology, the extent of other PRPs
participation in clean-up efforts, developments in ongoing environmental
analyses related to sites determined to be contaminated, and developments in
environmental surveys and studies of potentially contaminated sites. As a
result, charges to income for environmental liabilities could possibly have a
significant effect on results of operations in a particular quarter or fiscal
year as individual site studies and remediation and restoration efforts
proceed or as new sites arise. However, expenditures associated with such
liabilities are typically paid out over a long period, in some cases up to 40
years, and are therefore not expected to have a material adverse effect on
Railroad's consolidated financial position, cash flow or liquidity.
-15-
<PAGE> 19
In November 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits." This standard requires employers to
recognize benefits provided to former or inactive employees after employment
but before retirement, if certain conditions are met. In the first quarter of
1994, Railroad will adopt SFAS No. 112. The principal effect of adopting this
standard will be to establish liabilities for long-term and short-term
disability plans. The effect upon earnings to adopt this standard is expected
to be approximately $15 to $20 million. The initial effect of applying this
standard will be reported as the effect of a change in accounting method and
previously issued financial statements will not be restated.
In May 1993, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 addresses the
accounting and reporting requirements for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities, and is effective for fiscal years beginning after December 15,
1993. The initial effect of applying this standard is to be reported as the
effect of a change in accounting method and previously issued financial
statements may not be restated. No material effect on Railroad's financial
condition or results of operations is anticipated from the adoption of SFAS
No. 115.
-16-
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)
Year ended December 31, 1993 1992 1991
- ----------------------- ------ ------ ------
Revenues............................................ $4,699 $4,630 $4,559
Costs and expenses:
Compensation and benefits......................... 1,701 1,704 1,753
Fuel.............................................. 362 348 368
Materials......................................... 300 295 283
Equipment rents................................... 425 410 413
Purchased services................................ 464 457 444
Depreciation...................................... 334 324 340
Other............................................. 463 505 489
Special charge.................................... - - 708
------ ------ ------
Total costs and expenses........................ 4,049 4,043 4,798
------ ------ ------
Operating income (loss)............................. 650 587 (239)
Interest expense.................................... 86 103 136
Other income (expense), net......................... 12 57 (10)
------ ------ ------
Income (loss) before income taxes and cumulative
effect of changes in accounting methods........... 576 541 (385)
Income tax expense (benefit)........................ 244 186 (140)
------ ------ ------
Income (loss) before cumulative effect of changes
in accounting methods............................. 332 355 (245)
Cumulative effect of change in accounting methods,
net of tax........................................ - (21) -
------ ------ ------
Net income (loss)............................. $ 332 $ 334 $ (245)
====== ====== ======
See accompanying notes to consolidated financial statements.
-17-
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)
December 31, 1993 1992
- ------------ ------ ------
ASSETS
Current assets:
Cash and cash equivalents....................... $ 17 $ 57
Accounts receivable, net........................ 591 474
Materials and supplies.......................... 91 106
Current portion of deferred income taxes........ 167 144
Other current assets............................ 23 22
------ ------
Total current assets.......................... 889 803
Property and equipment, net....................... 5,488 5,285
Investments in and advances to affiliates......... 104 133
Other assets...................................... 130 116
------ ------
Total assets.............................. $6,611 $6,337
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................ $ 498 $ 479
Casualty and environmental reserves............. 286 249
Compensation and benefits payable............... 269 319
Taxes payable................................... 131 124
Accrued interest................................ 22 24
Other current liabilities....................... 69 71
Current portion of long-term debt............... 177 37
Commercial paper................................ 26 -
------ ------
Total current liabilities..................... 1,478 1,303
Long-term debt.................................... 702 921
Deferred income taxes............................. 1,329 1,178
Casualty and environmental reserves............... 426 482
Other liabilities................................. 182 217
------ ------
Total liabilities............................. 4,117 4,101
------ ------
Common stockholder's equity:
Common stock, without par value (1,000 shares
authorized, issued and outstanding)........... 1,191 1,190
Retained earnings............................... 1,303 1,046
------ ------
Total common stockholder's equity............. 2,494 2,236
------ ------
Total liabilities and stockholder's equity $6,611 $6,337
====== ======
See accompanying notes to consolidated financial statements.
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<PAGE> 22
CONSOLIDATED STATEMENTS OF CASH FLOWS
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)
Year ended December 31, 1993 1992 1991
- ----------------------- ------ ------ ------
Cash flows from operating activities:
Net income (loss)............................... $ 332 $ 334 $(245)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Cumulative effect of changes in accounting
methods..................................... - 21 -
Depreciation.................................. 334 324 340
Deferred income taxes......................... 128 25 (259)
Special charge................................ - - 708
Changes in current assets and liabilities:
Accounts receivable, net.................... (117) (30) (104)
Materials and supplies...................... 6 2 9
Other current assets........................ (1) 1 (9)
Accounts payable............................ 19 19 (14)
Casualty and environmental reserves......... 37 2 10
Compensation and benefits payable........... (50) 16 (58)
Taxes payable............................... 7 4 7
Accrued interest............................ (2) (9) (2)
Other current liabilities................... (2) 3 24
Changes in long-term casualty and
environmental reserves...................... (56) 16 (13)
Other, net.................................... (60) (22) (1)
----- ----- -----
Net cash provided by operating activities... 575 706 393
----- ----- -----
Cash flows from investing activities:
Additions to property and equipment............. (530) (469) (355)
Collections from (advances to) affiliates, net.. 29 266 (48)
Proceeds from property and equipment
dispositions.................................. 35 33 57
Other, net...................................... (16) (19) (10)
----- ----- -----
Net cash used in investing activities....... (482) (189) (356)
----- ----- -----
Cash flows from financing activities:
Net increase (decrease) in commercial paper..... 26 (353) 118
Payments on long-term debt...................... (83) (71) (70)
Dividends paid.................................. (75) (50) (125)
Other, net...................................... (1) (2) -
----- ----- -----
Net cash used in financing activities....... (133) (476) (77)
----- ----- -----
Increase (decrease) in cash and cash
equivalents............................... (40) 41 (40)
Cash and cash equivalents:
Beginning of year............................... 57 16 56
----- ----- -----
End of year..................................... $ 17 $ 57 $ 16
===== ===== =====
Supplemental cash flow information:
Interest paid, net of amounts capitalized....... $ 92 $ 110 $ 131
Income taxes paid, net of refunds............... 109 163 102
See accompanying notes to consolidated financial statements.
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<PAGE> 23
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
Burlington Northern Railroad Company and Subsidiaries
(Dollars in millions)
<TABLE>
<CAPTION> Amount
Number of -------------------------------------------
Common Common Retained
Three years ended December 31, 1993 Shares Stock Earnings Total
- ----------------------------------- --------- ------ -------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1990........ 1,000 $1,190 $1,132 $2,322
Net loss............................ (245) (245)
Dividends........................... (125) (125)
----- ------ ------ ------
Balance at December 31, 1991........ 1,000 1,190 762 1,952
Net income.......................... 334 334
Dividends........................... (50) (50)
----- ------ ------ ------
Balance at December 31, 1992........ 1,000 1,190 1,046 2,236
Net income.......................... 332 332
Dividends........................... (75) (75)
Capital contribution from parent.... 1 1
----- ------ ------ ------
Balance at December 31, 1993........ 1,000 $1,191 $1,303 $2,494
===== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
-20-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Burlington Northern Railroad Company and Subsidiaries
1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Burlington Northern Railroad Company (Railroad) is a wholly owned
subsidiary of Burlington Northern Inc. (BNI). The consolidated financial
statements include the accounts of Railroad and its majority-owned
subsidiaries. All significant intercompany accounts and transactions between
Railroad and its affiliates have been eliminated.
PROPERTY AND EQUIPMENT
Main line track is depreciated on a group basis using a units-of-production
method. All other property and equipment are depreciated on a straight-line
basis over estimated useful lives. Interstate Commerce Commission (ICC)
regulations require periodic formal studies of ultimate service lives for all
railroad assets. Resulting service life estimates are subject to review and
approval by the ICC. An annual review of rates and accumulated depreciation
is performed and appropriate adjustments are recorded. Significant premature
retirements are recorded as gains or losses at the time of their occurrence,
which would include major casualty losses, abandonments, sales and
obsolescence of assets. Expenditures which significantly increase asset
values or extend useful lives are capitalized. Repair and maintenance
expenditures are charged to operating expense when the work is performed. All
properties are stated at cost.
MATERIALS AND SUPPLIES
Materials and supplies consist mainly of diesel fuel, repair parts for
equipment and other railroad property and are valued at average cost.
REVENUE RECOGNITION
Transportation revenues are recognized proportionately as a shipment moves
from origin to destination.
INCOME TAXES
Income taxes are provided based on earnings reported for tax return
purposes in addition to a provision for deferred income taxes. The provision
for income taxes includes deferred taxes determined by the change in the
deferred tax liability, which is computed based on the differences between the
financial statement and tax basis of assets and liabilities as measured by
applying enacted tax laws and rates. Deferred tax expense is the result of
changes in the net liability for deferred taxes. Investment tax credits were
accounted for under the "flow-through" method.
CASH AND CASH EQUIVALENTS
All short-term investments which mature in less than 90 days when purchased
are considered cash equivalents for purposes of disclosure in the consolidated
balance sheets and consolidated statements of cash flows. Cash equivalents
are stated at cost, which approximates market value.
-21-
<PAGE> 25
RECLASSIFICATIONS
Certain prior year data has been reclassified to conform to the current
year presentation. These reclassifications had no effect on previously
reported net income, stockholder's equity or cash flows.
2. ACCOUNTS RECEIVABLE, NET
Railroad has an agreement to sell, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts receivable with
limited recourse. As of December 31, 1993, the agreement allowed for the sale
of accounts receivable up to a maximum of $175 million. The agreement expires
not later than December 1994. Average monthly proceeds from the sale of
accounts receivable were $182 million, $190 million and $269 million in 1993,
1992 and 1991, respectively. At December 31, 1993 and 1992, accounts
receivable were net of $100 million and $189 million, respectively,
representing receivables sold. Included in other income (expense), net were
expenses of $9 million, $11 million and $20 million in 1993, 1992 and 1991,
respectively, relating to the sale. Railroad maintains an allowance for
doubtful accounts based upon the expected collectibility of all trade accounts
receivable, including receivables sold with recourse. Allowances for doubtful
accounts and recourse on receivables sold of $17 million and $16 million have
been recorded at December 31, 1993 and 1992.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net was as follows (in millions):
December 31, 1993 1992
- ------------ ------ ------
Road, roadway structures and real estate.......... $7,342 $7,024
Equipment......................................... 1,784 1,744
------ ------
Total cost..................................... 9,126 8,768
Less accumulated depreciation..................... 3,638 3,483
------ ------
Property and equipment, net.................. $5,488 $5,285
====== ======
Certain noncancellable leases were classified as capital leases and were
included in property and equipment. The consolidated balance sheets at
December 31, 1993 and 1992 included $36 million and $35 million, respectively,
of property and equipment under capital leases. The related depreciation was
included in depreciation expense. Accumulated depreciation for property and
equipment under capital leases was $31 million and $29 million at December 31,
1993 and 1992, respectively.
Main line track is depreciated on a group basis using a units-of-production
method. The accumulated depreciation and annual depreciation accrual rates
for railroad assets other than main line track are calculated using a
straight-line method and statistical group measurement techniques, which
closely approximate unit depreciation. The group techniques project
depreciation expense and estimated accumulated depreciation utilizing
historical experience and expected future conditions relating to the timing of
asset retirements, cost of removal, salvage proceeds, maintenance practices
and technological changes. In this manner, the net book value of reported
assets reflects estimated remaining asset utility on a historical cost basis.
Due to the imprecision of annual reviews using statistical group
measurement techniques for long-term asset retirement, replacement and
deterioration patterns, Railroad adjusts accumulated depreciation for
-22-
<PAGE> 26
significant differences between recorded accumulated depreciation and computed
requirements. Differences between recorded accumulated depreciation and
computed requirements are recognized prospectively on a straight-line basis.
Under ICC regulations, Railroad conducts service life studies on an annual
basis. Results of service life studies are recorded over the remaining life
of the asset group studied. During 1993, Railroad completed service life
studies of equipment and road property. During 1992, the service life studies
consisted of rail. The effect of implementing the results of new service life
studies and similar rate adjustments were to decrease depreciation expense in
1993 by $2 million compared with 1992 and to decrease depreciation expense in
1992 by $28 million compared with 1991. In future periods, service life
studies will be conducted on other asset groups as well as these same assets
under ICC requirements. However, the impact of such studies is not
determinable at this time.
In 1993, capitalization of certain software development costs increased as
a result of new strategic initiatives. Capitalization of software development
costs begins upon establishment of technological feasibility. The
establishment of technological feasibility is based upon completion of
planning, design and other technical performance requirements.
Capitalized software development costs are amortized over a seven-year
estimated useful life using the straight-line method. No amortization was
recorded for the year ended December 31, 1993. Unamortized capitalized
software costs were $6 million as of December 31, 1993.
4. DEBT
Debt outstanding was as follows (in millions):
December 31, 1993 1992
- ------------ ---- ----
LONG-TERM DEBT
Consolidated mortgage bonds, 3 1/5% to 10%,
due serially to 2045............................... $622 $673
Equipment and other obligations, weighted
average rate of 7.33% and 7.72%, respectively, due
serially to 2009................................... 113 139
General mortgage bonds, 3 1/8% and 2 5/8%, due 2000
and 2010, respectively............................. 62 62
Prior lien railway and land grant bonds, 4%, due 1997 57 57
General lien railway and land grant bonds, 3%,
due 2047........................................... 35 35
First mortgage bonds, series A, 4%, due 1997......... 24 26
Capitalized lease obligations, weighted average
rate of 8.20% and 7.92%, respectively, expiring
1996 and 2003...................................... 10 13
Income debentures, series A, 5%, due 2006............ 8 8
Commercial paper..................................... 26 -
Unamortized discount.................................... (52) (55)
---- ----
Total.............................................. 905 958
Less:
Current portion of long-term debt.................... 177 37
Commercial paper..................................... 26 -
---- ----
Long-term debt................................... $702 $921
==== ====
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<PAGE> 27
Railroad maintains an effective program for the issuance, from time to
time, of commercial paper. These borrowings are supported by Railroad's bank
credit agreement, thus outstanding commercial paper balances reduce available
borrowings under this agreement. The bank credit agreement allows borrowings
of up to $500 million on a short-term basis. The agreement is currently
scheduled to expire in November 1994. At Railroad's option, borrowing rates
are based on prime, certificate of deposit or London Interbank Offered rates.
Annual facility fees are 0.25 percent. The maturity value of commercial paper
outstanding at December 31, 1993 was $27 million, leaving a total of $473
million of the credit agreement available, while no commercial paper was
outstanding at December 31, 1992.
The financial covenants of the bank credit agreement require that
Railroad's consolidated tangible net worth, as defined in the agreement, be at
least $1.4 billion, and its debt, as defined in the agreement, cannot exceed
the lesser of 140 percent of its consolidated tangible net worth or $2.5
billion.
The agreement contains an event of default arising out of the occurrence
and continuance of a "Change in Control." A "Change in Control" is generally
defined as the acquisition of more than 50 percent of the voting securities of
BNI, which has not been approved by the BNI Board of Directors, a change in
the control relationship between BNI and Railroad, and finally, a "Change in
Control" is deemed to occur when a majority of the seats on the BNI Board of
Directors is occupied by persons who are neither nominated by BNI management
nor appointed by directors so nominated.
The commercial paper program is further summarized as follows (dollars in
millions):
December 31, 1993 1992
- ------------ ---- ----
Balance at year end................................. $ 26 $ -
Weighted average interest rate...................... 3.55% -
Maximum outstanding during the year................. $ 179 $ 427
Average daily amount outstanding during the year.... $ 41 $ 129
Weighted daily average interest rate during the year 3.27% 4.07%
Maturities of commercial paper averaged 4 and 14 days in 1993 and 1992,
respectively.
Aggregate long-term debt scheduled maturities for 1994 through 1998 and
thereafter are $177 million, $24 million, $18 million, $235 million, $11
million and $466 million, respectively.
Substantially all Railroad properties and certain other assets are pledged
as collateral to or are otherwise restricted under the various Railroad
long-term debt agreements.
5. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of Railroad's financial instruments at December
31, 1993 and 1992 and the methods and assumptions used to estimate the fair
value of each class of financial instruments held by Railroad, were as follows:
CASH AND SHORT-TERM INVESTMENTS
The carrying amount approximated fair value because of the short maturity
of these instruments.
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<PAGE> 28
NOTES RECEIVABLE
The fair value of notes receivable was estimated by discounting the
anticipated cash flows. Discount rates of 8.7 percent and 10 percent at
December 31, 1993 and 1992, were determined to be appropriate when considering
current U.S. Treasury rates and the credit risk associated with these notes.
ACCRUED INTEREST PAYABLE
The carrying amount approximated fair value as the majority of interest
payments are made semiannually.
LONG-TERM DEBT AND COMMERCIAL PAPER
The fair value of Railroad's long-term debt, excluding unamortized
discount, was primarily based on secondary market indicators. For those
issues not actively quoted, estimates were based on each obligation's
characteristics. Among the factors considered were the maturity, interest
rate, credit rating, collateral, amortization schedule, liquidity and option
features such as optional redemption or optional sinking funds. These
features were compared to other similar outstanding obligations to determine
an appropriate increment or spread, above U.S. Treasury rates, at which the
cash flows were discounted to determine the fair value. The carrying amount
of commercial paper approximated fair value because of the short maturity of
these instruments.
RECOURSE LIABILITY FROM SALE OF RECEIVABLES
It is unlikely that Railroad would be able to pay a second entity to assume
its recourse obligation. Therefore, the carrying value of the allowance for
doubtful accounts on receivables sold approximated the fair value of the
recourse liability related to those receivables.
The carrying amount and estimated fair values of Railroad's financial
instruments were as follows (in millions):
December 31, 1993 1992
- ------------ ---------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
Cash and short-term investments...... $ 17 $ 17 $ 57 $ 57
Notes receivable..................... 9 11 9 9
Accrued interest payable............. 22 22 24 24
Long-term debt and commercial paper.. 957 978 1,013 1,007
Recourse liability from sale of
receivables....................... 4 4 5 5
Railroad also holds investments in, and has advances to, several
unconsolidated transportation affiliates. It was not practicable to estimate
the fair value of these financial instruments, which were carried at their
original cost of $17 million and $16 million in the December 31, 1993 and 1992
consolidated balance sheets. There were no quoted market prices available for
the shares held in the affiliated entities, and the cost of obtaining an
independent valuation would have been excessive considering the materiality of
these investments to Railroad.
In addition, Railroad has a note receivable, from a shortline railroad,
that has principal payments which are based on traffic volume over a segment
of line. The carrying value of the note was $5 million at December 31, 1993
and 1992. As it is not practicable to forecast the traffic volume over the
remaining life of the note, it was not included in the notes receivable amount
shown above.
-25-
<PAGE> 29
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115 addresses
the accounting and reporting requirements for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities, and is effective for fiscal years beginning after December 15,
1993. The initial effect of applying this standard is to be reported as the
effect of a change in accounting method and previously issued financial
statements may not be restated. No material effect on Railroad's financial
condition or results of operations is anticipated from the adoption of SFAS
No. 115.
6. INCOME TAXES
Effective January 1, 1993, Railroad adopted SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 modifies SFAS No. 96, which established the
liability method of accounting for income taxes, and had been adopted by
Railroad effective January 1, 1986. Railroad adopted SFAS No. 109 consistent
with the transitional guidelines of SFAS No. 109. The effect of the adoption
was to increase the current portion of the deferred income tax asset with a
corresponding increase in the noncurrent deferred income tax liability of $26
million at January 1, 1993. There was no effect on net income, stockholder's
equity or cash flows.
Income tax expense (benefit), excluding the cumulative effect of changes in
accounting methods, was as follows (in millions):
Year ended December 31, 1993 1992 1991
- ----------------------- ----- ---- -----
Current:
Federal ................................... $ 102 $138 $ 107
State ..................................... 14 23 12
----- ---- -----
116 161 119
----- ---- -----
Deferred:
Federal ................................... 111 24 (227)
State ..................................... 18 1 (32)
----- ---- -----
129 25 (259)
----- ---- -----
Total.................................... $ 244 $186 $(140)
===== ==== =====
Reconciliation of the federal statutory income tax rate to the effective
tax rate, excluding the cumulative effect of changes in accounting methods,
was as follows:
Year ended December 31, 1993 1992 1991
- ----------------------- ----- ---- -----
Federal statutory income tax rate................. 35.0% 34.0% 34.0%
State income taxes, net of federal tax benefit.... 3.5 3.3 3.4
Effect of one percent federal tax rate increase on
deferred tax balances at January 1, 1993....... 4.5 - -
Internal Revenue Service settlement............... - (3.1) -
Other, net........................................ (.6) .2 (1.0)
----- ---- -----
Effective tax rate............................. 42.4% 34.4% 36.4%
===== ==== =====
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<PAGE> 30
The components of deferred tax assets and liabilities were as follows (in
millions):
December 31, 1993 1992
- ------------ ------- -------
Deferred tax liabilities:
Accelerated depreciation and amortization...... $(1,616) $(1,510)
Other.......................................... (89) (81)
------- -------
Total deferred tax liabilities............... (1,705) (1,591)
------- -------
Deferred tax assets:
Casualty and environmental reserves............ 267 270
Pensions....................................... 29 28
Other.......................................... 247 259
------- -------
Total deferred tax assets.................... 543 557
------- -------
Valuation allowance............................ - -
------- -------
Net deferred tax liability................. $(1,162) $(1,034)
======= =======
Noncurrent deferred income tax liability........ $(1,329) $(1,178)
Current deferred income tax asset............... 167 144
------- -------
Net deferred tax liability................. $(1,162) $(1,034)
======= =======
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (the Act)
was signed into law. The Act increased the corporate federal income tax rate
by one percent, effective January 1, 1993, which reduced net income by $28
million through the date of enactment. A one-time, non-cash charge of $27
million to income tax expense was recorded as an adjustment to deferred taxes
as of the enactment date and a charge of $1 million to income tax expense was
recorded as an adjustment to current income taxes.
In December 1992, Railroad received notification that an Appeals Division
settlement of the Internal Revenue Service audits for the years 1981 through
1985 had been approved by the Joint Committee on Taxation. This action
settled all unagreed issues for those years. The tax effect of the settlement
was included in the 1992 tax provision as shown below (in millions):
Current tax expense.............................. $ 2
Deferred tax benefit............................. (19)
----
Total tax benefit.............................. $(17)
====
7. RETIREMENT PLANS
Railroad participates in BNI's pension plans, which are non-contributory
defined benefit plans covering substantially all non-union employees. The
benefits are based on years of credited service and the highest five-year
average compensation levels. Contributions to the plans are determined by BNI
and are limited to amounts that are currently deductible for tax purposes.
Railroad's pension expense was $26 million, $31 million and $23 million in
1993, 1992 and 1991, respectively. Net pension cost for 1993 was lower than
1992 primarily due to a decrease in the rate of future compensation growth
from 6 percent to 5.5 percent. The changes in pension cost for the two years
ended December 31, 1992 were primarily attributable to the expected
year-to-year changes in the discount rates.
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<PAGE> 31
Railroad participates in a 401(k) thrift and profit sharing plan, sponsored
by BNI, which covers substantially all non-union employees. BNI matches 35
percent of the first 6 percent of the employees' contributions, which is
subject to certain percentage limits of the employees' earnings, at the end of
each quarter. Depending on BNI's consolidated performance, an additional
matching contribution of 20 or 40 percent can be made at the end of the year.
Railroad's expense was $6 million, $4 million and $6 million in 1993, 1992
and 1991, respectively. Effective January 1, 1994, Railroad also participates
in a 401(k) retirement savings plan, sponsored by BNI, which covers
substantially all union employees which is non-contributory on the part of
Railroad.
8. OTHER BENEFIT PLANS
POSTRETIREMENT BENEFITS
Effective January 1, 1992, Railroad adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." BNI provides
certain postretirement health care benefits, payable until age 65, for a small
number of retirees who retired on or before March 1986.
BNI provides life insurance benefits for eligible non-union employees.
Railroad participates in these plans and adopted accrual accounting for the
expense of these plans in 1992 by taking a $16 million cumulative effect
charge to income in order to establish a liability for those benefits.
Railroad pays benefits as claims are processed. In addition, Railroad's
expense for these plans was approximately $1 million in both 1993 and 1992.
Under collective bargaining agreements, Railroad participates in
multi-employer benefit plans which provide certain postretirement health care
and life insurance benefits for eligible union employees. Insurance premiums
attributable to retirees, which are expensed as incurred, were $10 million in
1993 and $11 million in both 1992 and 1991.
POSTEMPLOYMENT BENEFITS
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This standard requires employers to recognize
benefits provided to former or inactive employees after employment but before
retirement, if certain conditions are met. In the first quarter of 1994,
Railroad will adopt SFAS No. 112. The principal effect of adopting this
standard will be to establish liabilities for long-term and short-term
disability plans. The effect upon earnings to adopt this standard is expected
to be approximately $15 to $20 million. The initial effect of applying this
standard will be reported as the effect of a change in accounting method and
previously issued financial statements will not be restated.
9. CASUALTY AND ENVIRONMENTAL RESERVES
Casualty reserves consist primarily of personal injury claims, including
work-related injuries to employees. Employees of Railroad are compensated for
work-related injuries according to the provisions of the Federal Employers'
Liability Act. Liabilities for personal injury claims are estimated through
an actuarial model that considers historical data and trends and is designed
to record those costs in the period of occurrence. Railroad conducts an
ongoing review and analysis of claims and other information to ensure the
continued adequacy of casualty reserves. To the extent costs exceed recorded
-28-
<PAGE> 32
accruals they will not materially affect Railroad's financial condition,
results of operations or liquidity.
Under the requirements of the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (Superfund) and certain other
laws, Railroad is potentially liable for the cost of clean-up of various
contaminated sites identified by the U.S. Environmental Protection Agency and
other agencies. Railroad has been notified that it is a potentially
responsible party (PRP) for study and clean-up costs at a number of sites and,
in many instances, is one of several PRPs. Railroad generally participates in
the clean-up of these sites through cost-sharing agreements with terms that
vary from site to site. Costs are typically allocated based on relative
volumetric contribution of material, the amount of time the site was owned or
operated, and/or the portion of the total site owned or operated by each PRP.
However, under Superfund and certain other laws, as a PRP, Railroad can be
held jointly and severally liable for all environmental costs associated with
a site.
Environmental costs include initial site surveys and environmental studies
of potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when Railroad's liability
for environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. Railroad conducts an ongoing environmental contingency analysis,
which considers a combination of factors, including independent consulting
reports, site visits, legal reviews, analysis of the likelihood of
participation in and ability to pay for clean-up by other PRPs, and historical
trend analysis.
Liabilities for environmental costs represent Railroad's best estimates
for remediation and restoration of these sites and include asserted and
unasserted claims. Railroad's best estimate of unasserted claims was
approximately $5 million as of the end of 1993. Although recorded liabilities
include Railroad's best estimates of all costs, without reduction for
anticipated recovery from insurance, Railroad's total clean-up cost at these
sites cannot be predicted with certainty due to various factors such as the
extent of corrective actions that may be required, evolving environmental laws
and regulations, advances in environmental technology, the extent of other
PRPs participation in clean-up efforts, developments in ongoing environmental
analyses related to sites determined to be contaminated, and developments in
environmental surveys and studies of potentially contaminated sites. As a
result, charges to income for environmental liabilities could possibly have a
significant effect on results of operations in a particular quarter or fiscal
year as individual site studies and remediation and restoration efforts
proceed or as new sites arise. However, expenditures associated with such
liabilities are typically paid out over a long period, in some cases up to 40
years, and are therefore not expected to have a material adverse effect on
Railroad's consolidated financial position, cash flow or liquidity.
10. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
Railroad has substantial lease commitments for railroad, highway and data
processing equipment, office buildings and a taconite dock facility. Most of
these leases provide the option to purchase the equipment at fair market value
at the end of the lease. However, some provide fixed purchase price options.
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<PAGE> 33
Lease rental expense for operating leases was $205 million, $222 million
and $211 million for the years ended December 31, 1993, 1992 and 1991,
respectively.
Minimum annual rental commitments were as follows (in millions):
Capital Operating
Year ended December 31, Leases Leases
- ----------------------- ------- ---------
1994......................................... $ 5 $ 209
1995......................................... 4 185
1996......................................... 2 162
1997......................................... - 146
1998......................................... - 145
Thereafter................................... 1 911
--- ------
Total.................................... 12 $1,758
Less amount representing interest............ 2 ======
---
Present value of minimum lease payments.. $10
===
In addition to the above, Railroad also receives and pays rents for
railroad equipment on a per diem basis, which is included in equipment rents.
OTHER COMMITMENTS AND CONTINGENCIES
During 1993, Railroad entered into an agreement to acquire 350
new-technology alternating current traction motor locomotives. Railroad
accepted delivery of one locomotive in 1993 and anticipates delivery of
between approximately 60 and 100 each year from 1994 through 1997.
Railroad has two locomotive electrical power purchase agreements, expiring
in 1998 and 2001, that currently involve 199 locomotives. Payments required
by the agreements are based upon the number of megawatt hours of energy
consumed, subject to specified take-or-pay minimums. The rates specified in
the two agreements are renegotiable every two years. Railroad's 1994 minimum
commitment obligation is $48 million. Based on projected locomotive power
requirements, Railroad's payments in 1994 are expected to be in excess of the
minimum. Payments under the agreements totaled $53 million, $56 million and
$55 million in 1993, 1992 and 1991, respectively, which exceeded the
applicable minimums in each year. In 1990, Railroad entered into a letter of
credit for the benefit of a vendor. This letter of credit is a performance
guarantee for up to $15 million in major overhauls to be performed on the
power purchase equipment.
In connection with its program to transfer certain rail lines to
independent operators, Railroad has agreed to make certain payments for
services performed by the operators in connection with traffic that involves
the shortlines and Railroad as carriers. These payments are not fixed in
amount, will vary with such factors as traffic volumes and shortline costs and
are not expected to exceed normal business requirements for services
received. These payments are reflected as reductions to revenue to conform
with reporting to the ICC. Revenues for these joint moves, including amounts
applicable to the independent operator portion of the line haul, are reflected
by Railroad as revenue from operations.
There are no other commitments or contingent liabilities which Railroad
believes would have a material adverse effect on the consolidated financial
position, results of operations or liquidity.
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<PAGE> 34
11. OTHER INCOME (EXPENSE), NET
Other income (expense), net includes the following (in millions):
Year ended December 31, 1993 1992 1991
- ----------------------- ---- ---- ----
Gain on property dispositions..................... $19 $ 9 $ 4
Interest income................................... 9 11 5
Loss on sale of receivables....................... (9) (11) (20)
Litigation settlement agreement................... - 47 -
Miscellaneous, net................................ (7) 1 1
--- ---- ----
Total......................................... $12 $ 57 $(10)
=== ==== ====
In the first quarter of 1992, both Railroad and BNI were parties to a
settlement agreement relating to the reimbursement of attorneys' fees and
costs incurred by Railroad in connection with litigation filed by Energy
Transportation Systems, Inc., and others, and reimbursement of a portion of
the amount paid in prior years by Railroad in settlement of that action.
Under the terms of the settlement, Railroad received approximately $50 million
before legal fees.
12. ACCOUNTING CHANGES
Effective January 1, 1993, Railroad adopted SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 modifies SFAS No. 96, which established the
liability method of accounting for income taxes, and had been adopted by
Railroad effective January 1, 1986. Railroad adopted SFAS No. 109 consistent
with the transitional guidelines of SFAS No. 109. The effect of the adoption
was to increase the current portion of the deferred income tax asset with a
corresponding increase in the noncurrent deferred income tax liability of $26
million at January 1, 1993. There was no effect on net income, stockholder's
equity or cash flows.
In January 1992, the Emerging Issues Task Force of the FASB reached a
consensus that origination of service revenue recognition was not an
acceptable method beginning in 1992 for the freight services industry.
Accordingly, effective January 1, 1992, Railroad changed its method of revenue
recognition from one which recognized transportation revenue at the
origination point, to a method whereby transportation revenue is recognized
proportionately as a shipment moves from origin to destination. The
cumulative effect, net of a $7 million income tax benefit, of the change on
the prior year's revenue, at the time of adoption, decreased 1992 net income
by $11 million.
In the fourth quarter of 1992, effective January 1, 1992, Railroad adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and elected immediate recognition of the $16 million transition
obligation. The cumulative effect, net of a $6 million income tax benefit, of
the change on prior years', at the time of adoption, decreased 1992 net income
by $10 million.
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<PAGE> 35
Financial results for the first quarter of 1992 have previously been
restated for the cumulative effect of the change in accounting method for
revenue recognition, which had previously been reported in other income
(expense), net and for the cumulative effect of the implementation of the
accounting standard for postretirement benefits. There was no material effect
on the second and third quarter, and those quarters were not restated for the
adoption of SFAS No. 106.
13. 1991 SPECIAL CHARGE
Included in 1991 results was a pre-tax special charge of $708 million
related to railroad restructuring costs and increases in liabilities for
casualty claims and environmental clean-up costs. The 1991 special charge
included the following components:
RESTRUCTURING
This program provided for work force reduction of employees. The
restructuring program and related charge had two components:
. $185 million to provide for employee related costs for the elimination of
surplus crew positions.
. $40 million to provide for employee related costs for a separation program.
OTHER
. $350 million to increase casualty reserves based on an actuarial valuation
and escalations in both the cost and number of projected hearing loss
claims.
. $133 million to increase environmental reserves based on studies and
analyses of potential environmental clean-up and restoration costs.
The special charge reduced 1991 net income by $442 million.
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<PAGE> 36
14. RELATED PARTY TRANSACTIONS
In addition to various corporate-related transactions with its parent,
BNI, Railroad also rents under operating leases rolling stock and other
property from BN Leasing Corporation (BNLC), a wholly owned subsidiary of
BNI. The following is a summary of balances representing the result of
transactions with related parties (in millions):
December 31, 1993 1992
- ------------ ---- ----
Short-term:
Payable to BNLC for rent associated
with property and equipment....................... $ 8 $ 6
==== ====
Receivable from BNLC for accrued interest associated
with the notes receivable for hub centers and rail
facilities........................................ $ 2 $ 2
==== ====
Long-term:
Receivable from BNI, representing net settlement
account for dividends, taxes and other............ $ 9 $ 43
Notes receivable from BNLC for hub centers.......... 28 28
Note receivable from BNLC for rail facilities....... 41 41
Investments in affiliates........................... 7 7
Receivable from other affiliates.................... 19 14
---- ----
Total investments in and advances to affiliates... $104 $133
==== ====
Railroad recorded the following amounts for transactions with related
parties (in millions):
Year ended December 31, 1993 1992 1991
- ----------------------- ---- ---- ----
Rental expense.......................... $ 39 $ 32 $ 18
Interest income......................... 7 8 3
In prior years, Railroad transferred the Denver and Houston hub centers to
Burlington Northern Railroad Holdings, Inc. (BNRRHI), a wholly owned
subsidiary of Railroad. BNRRHI subsequently sold the hub centers to BNLC.
The hub centers, with a combined book value of $22 million, were sold for the
fair market value of $28 million. BNRRHI received two promissory notes due
October 31, 2000, with interest at 10.05 percent from BNLC for the total sale
price. The notes will be paid off using proceeds generated from rental
payments from Railroad to BNLC for use of the facilities at the rate of $3
million per year. No gain was recorded on the sale of the property.
In prior years, Railroad purchased certain rail facilities at and between
Ortonville, Minnesota and Terry, Montana from the South Dakota Rail
Authority. These properties were subsequently sold to BNLC for the recorded
net book value of the property. Railroad received a promissory note from BNLC
for the purchase price of $41 million. Interest at a rate of 10.0 percent is
due annually. Principal is due at maturity on August 31, 2001. Railroad will
make rental payments of $5 million per year until 2001 for use of these
facilities. No gain or loss was recorded on the sale of the property.
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<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Directors of
Burlington Northern Railroad Company and Subsidiaries
We have audited the consolidated financial statements and financial
statement schedules of Burlington Northern Railroad Company and Subsidiaries
listed in Item 14 of this Form 10-K. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits according to generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Burlington Northern Railroad Company and Subsidiaries as of December 31,
1993 and 1992, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be included
therein.
As discussed in Note 12 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993 and for revenue
recognition and postretirement benefits other than pensions in 1992.
COOPERS & LYBRAND
Fort Worth, Texas
January 17, 1994
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<PAGE> 38
QUARTERLY FINANCIAL DATA-UNAUDITED
<TABLE>
<CAPTION>
(Dollars in millions) QUARTER
- --------------------- -------------------------------------------
Fourth Third Second First
------ ----- ------ -----
<S> <C> <C> <C> <C>
1993
Revenues.................................. $1,246 $1,141 $1,142 $1,170
Operating income.......................... 220 118 146 166
Net income (1)............................ 125 34 81 92
1992
Revenues.................................. $1,196 $1,158 $1,091 $1,185
Operating income.......................... 196 145 102 144
Income before cumulative effect of changes
in accounting methods (2)............... 128 75 50 102
Cumulative effect of changes in accounting
methods, net of tax..................... - - - (21)
------ ------ ------ ------
Net income (3)............................ $ 128 $ 75 $ 50 $ 81
====== ====== ====== ======
<FN>
(1) Results for the third quarter of 1993 include the effects of the Omnibus Budget
Reconciliation Act of 1993 (the Act) which was signed into law on August 10, 1993. The Act
increased the corporate federal income tax rate by one percent, effective January 1, 1993,
which reduced net income by $28 million through the date of enactment. Results for the third
quarter of 1993 also include the effects of the severe flooding in the Midwest. Railroad
estimates the flooding reduced revenues and operating income during the quarter by $44
million and $79 million, respectively, and reduced net income by $49 million.
(2) Results for 1992 reflect the cumulative effect of the change in accounting method for revenue
recognition, and the cumulative effect of the implementation of the accounting standard for
postretirement benefits (Statement of Financial Accounting Standards No. 106). The
cumulative effect of the change in accounting method for revenue recognition decreased 1992
net income by $11 million. The cumulative effect of the change in accounting method for
postretirement benefits decreased 1992 net income by $10 million and had no immediate effect
on cash flows.
(3) Results for the fourth quarter of 1992 include a $17 million reduction in income tax expense
as a result of a favorable Internal Revenue Service settlement which allowed Railroad to
recognize additional depreciation deductions for income taxes.
</TABLE>
-35-
<PAGE> 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEMS TEN, ELEVEN, TWELVE AND THIRTEEN
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; EXECUTIVE COMPENSATION;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable - see Table of Contents note.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
----
Financial Statements:
Consolidated Statements of Operations for the three years
ended December 31, 1993................................ 17
Consolidated Balance Sheets at December 31, 1993 and 1992 18
Consolidated Statements of Cash Flows for the three years
ended December 31, 1993................................ 19
Consolidated Statements of Changes in Common
Stockholder's Equity for the three years ended
December 31, 1993.................................... 20
Notes to Consolidated Financial Statements............... 21
Report of Independent Accountants.......................... 34
Quarterly financial data-unaudited......................... 35
Consolidated Financial Statement Schedules for the three
years ended December 31, 1993:
Schedule V-Property, Plant And Equipment................. 40
Schedule VI-Accumulated Depreciation, Depletion,
And Amortization of Property, Plant And Equipment...... 41
Schedule VIII-Valuation And Qualifying Accounts.......... 42
Schedule X-Supplementary Income Statement Information.... 43
Schedules other than those listed above are omitted for the reason that they
are not required or not applicable, or the required information is included in
the consolidated financial statements or related notes.
-36-
<PAGE> 40
Exhibit Index
The following exhibits are filed as part of this report.
Exhibit Page
Number Description Number
- ------- ----------- ------
3.1 Certificate of Incorporation of Burlington Northern **
Railroad Company as amended through July 20, 1987.
3.2 By-Laws of Burlington Northern Railroad Company **
as amended through July 17, 1991.
4.1 The Company has either previously filed with the *
Securities and Exchange Commission or upon request will
furnish a copy of any instrument with respect to the
long-term debt of the Company (1989 Form 10-K, filed
March 1990).
10.1 Trade Receivables Purchase and Sale Agreement, dated as *
of December 15, 1989, as amended by Amendment dated as
of December 15, 1989, by and among Burlington Northern
Railroad Company, Corporate Asset Funding Company, Inc.
and Citicorp North America, Inc. (1989 Form 10-K
Amendment No. 1, filed March 1990).
10.2 Trade Receivables Purchase and Sale Agreement, dated as *
of December 15, 1989, as amended by Amendment dated
as of December 15, 1989, by and among Burlington
Northern Railroad Company, the banks parties thereto and
Citicorp North America, Inc. (1989 Form 10-K
Amendment No. 1, filed March 1990).
10.3 $500,000,000 Competitive Advance Facility and Revolving *
Credit Facility Agreement, dated October 18, 1991,
between Burlington Northern Railroad Company and a
consortium of lenders (Form 10-Q for the quarter ended
September 30, 1991, filed October 1991).
10.4 Employment Agreement, dated as of September 4, 1990, by *
and between Burlington Northern Railroad Company
and Mr. John T. Chain (1990 Form 10-K, filed
March 1991).
10.5 Employment Agreement, dated as of September 18, 1991, by *
and between Burlington Northern Railroad Company
and Mr. Richard A. Russack (1991 Form 10-K, filed
February 1992).
* Exhibit is incorporated by reference as indicated.
** Exhibit is filed with Form 10-K for the year ended December 31, 1993.
-37-
<PAGE> 41
REPORTS ON FORM 8-K
During the fourth quarter of 1993, there were no reports filed on Form
8-K.
-38-
<PAGE> 42
SIGNATURES
Pursuant to the requirements of 13 or 15(d) of the Securities Exchange Act
of 1934, Burlington Northern Railroad Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BURLINGTON NORTHERN RAILROAD COMPANY
By /s/ GERALD GRINSTEIN
------------------------------------
Gerald Grinstein,
Chairman and Chief Executive Officer
Date February 14, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Burlington
Northern Railroad Company and in the capacities and on the dates indicated.
/s/ GERALD GRINSTEIN Chairman and
- ------------------------- Chief Executive Officer February 14, 1994
Gerald Grinstein
/s/ DAVID C. ANDERSON Executive Vice President and
- ------------------------- Chief Financial Officer February 14, 1994
David C. Anderson
/s/ DON S. SNYDER Vice President, Controller and
- ------------------------- Chief Accounting Officer February 14, 1994
Don S. Snyder
/s/ EDMUND W. BURKE Director
- ------------------------- February 14, 1994
Edmund W. Burke
/s/ WILLIAM E. GREENWOOD Director
- ------------------------- February 14, 1994
William E. Greenwood
-39-
<PAGE> 43
SCHEDULE V
BURLINGTON NORTHERN RAILROAD COMPANY AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance Balance
at Beginning Additions at End
Classification of Period at Cost Retirements Other(1) of Period
-------------- ------------ --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993:
Road, roadway structures and real estate... $7,024 $455 $145 $ 8 $7,342
Equipment.................................. 1,744 75 40 5 1,784
------ ---- ---- --- ------
Total...................................... $8,768 $530 $185 $13 $9,126
====== ==== ==== === ======
DECEMBER 31, 1992:
Road, roadway structures and real estate... $6,759 $401 $152 $16 $7,024
Equipment.................................. 1,748 68 73 1 1,744
------ ---- ---- --- ------
Total...................................... $8,507 $469 $225 $17 $8,768
====== ==== ==== === ======
DECEMBER 31, 1991:
Road, roadway structures and real estate... $6,713 $313 $279 $12 $6,759
Equipment.................................. 1,757 42 52 1 1,748
------ ---- ---- --- ------
Total...................................... $8,470 $355 $331 $13 $8,507
====== ==== ==== === ======
<FN>
(1) Relates primarily to reused track materials from Materials and Supplies inventory used for additions to
property.
</TABLE>
See accompanying notes to consolidated financial statements
for information regarding depreciation methods and other matters.
-40-
<PAGE> 44
SCHEDULE VI
BURLINGTON NORTHERN RAILROAD COMPANY AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance Additions Balance
at Beginning Charged at End
Classification of Period to Income Retirements Other(1) of Period
-------------- ------------ --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993:
Road, roadway structures and real estate.. $2,565 $257 $ 83 $(62) $2,677
Equipment................................. 918 77 28 (6) 961
------ ---- ---- ---- ------
Total..................................... $3,483 $334 $111 $(68) $3,638
====== ==== ==== ==== ======
DECEMBER 31, 1992:
Road, roadway structures and real estate.. $2,483 $241 $ 88 $(71) $2,565
Equipment................................. 896 83 53 (8) 918
------ ---- ---- ---- ------
Total..................................... $3,379 $324 $141 $(79) $3,483
====== ==== ==== ==== ======
DECEMBER 31, 1991:
Road, roadway structures and real estate.. $2,464 $265 $158 $(88) $2,483
Equipment................................. 867 75 38 (8) 896
------ ---- ---- ---- ------
Total..................................... $3,331 $340 $196 $(96) $3,379
====== ==== ==== ==== ======
<FN>
(1) Relates primarily to estimated net book value of retirements plus the cost to remove property before
determination of excess depreciation on assets retained.
</TABLE>
See accompanying notes to consolidated financial statements
for information regarding depreciation methods and other matters.
-41-
<PAGE> 45
SCHEDULE VIII
BURLINGTON NORTHERN RAILROAD COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Charged Balance at
Description Beginning of Period to Income Deductions(1) End of Period(2)
----------- ------------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1993:
Casualty and environmental reserves.. $731 $261 $280 $712
==== ==== ==== ====
DECEMBER 31, 1992:
Casualty and environmental reserves.. $713 $312 $294 $731
==== ==== ==== ====
DECEMBER 31, 1991:
Casualty and environmental reserves.. $219 $798 $304 $713
==== ==== ==== ====
<FN>
Notes:
(1) Principally represents cash payments.
(2) Classified in the consolidated balance sheets as follows:
1993 1992 1991
---- ---- ----
Casualty and environmental reserves
(current liabilities)............ $286 $249 $247
Casualty and environmental reserves
(noncurrent liabilities)......... 426 482 466
---- ---- ----
$712 $731 $713
==== ==== ====
</TABLE>
-42-
<PAGE> 46
SCHEDULE X
BURLINGTON NORTHERN RAILROAD COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Charged to
Costs and
Item Expenses
---- ----------
<S> <C>
1993:
Maintenance and repairs.......................... $1,765
Taxes, other than payroll and income taxes:
Property....................................... 73
Other.......................................... 31
1992:
Maintenance and repairs.......................... $1,748
Taxes, other than payroll and income taxes:
Property....................................... 72
Other.......................................... 33
1991:
Maintenance and repairs.......................... $1,781
Taxes, other than payroll and income taxes:
Property....................................... 71
Other.......................................... 37
<FN>
Note: Items omitted are either less than one percent of consolidated revenues or are disclosed elsewhere
in the consolidated financial statements or notes thereto.
</TABLE>
-43-
<PAGE> 47
Exhibit Index
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
<S> <C> <C>
3.1 Certificate of Incorporation of Burlington Northern
Railroad Company as amended through July 20, 1987.
3.2 By-Laws of Burlington Northern Railroad Company
as amended through July 17, 1991.
</TABLE>
<PAGE> 1
BURLINGTON
NORTHERN
RAILROAD
RESTATED CERTIFICATE
OF INCORPORATION
OF
BURLINGTON NORTHERN
RAILROAD COMPANY
As Amended July 20, 1987
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
BURLINGTON NORTHERN RAILROAD COMPANY
This Restated Certificate of Incorporation was duly
adopted by the Board of Directors of Burlington Northern Railroad Company, a
Delaware corporation, in accordance with the provisions of Section 245 of the
General Corporation Law of the State of Delaware, and only restates and
integrates and does not further amend the provisions of the corporation's
Certificate of Incorporation as heretofore amended or supplemented, and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation. The corporation was originally
incorporated in the State of Delaware under the name "Great Northern Pacific &
Burlington Lines, Inc." and its original Certificate of Incorporation was filed
with the Secretary of State of Delaware on January 13, 1961.
FIRST: The name of the corporation is Burlington
Northern Railroad Company.
SECOND: The registered office of the corporation in the
State of Delaware is located at 1209 Orange Street in the City of Wilmington,
County of New Castle. The name and address of its registered agent is The
Corporation Trust Company.
THIRD: The nature of the business, or objects or
purposes to be transacted, promoted or carried on by the corporation are
as follows:
1. To engage in any and all branches of the
business of transportation, whether by railroad, motor vehicle, pipe
line, water, air, or any other means of conveyance whatsoever now in existence
or hereafter invented or developed.
2. To acquire by purchase, merger, consolidation,
lease, sublease, or otherwise, and pay for in cash or in stocks, bonds, or
other securities of the corporation or otherwise, the whole or any part of the
franchises, goodwill, rights, assets and property of any railroad or
transportation company or any oil, gas, coal or other mineral company or
any timber or other natural resource company or other person, firm,
association, corporation, joint-stock company, syndicate, trust, body politic
or other entity.
3. To purchase, invest in, lease, sublease or
otherwise acquire and to own, mortgage, lease, sublease, sell or
otherwise dispose of franchises, rights of way,
<PAGE> 3
easements, permits and other rights and privileges of every type, whether
granted by the United States, any state, district or territory thereof,
any municipality, any foreign country, any other body politic, or any
subdivision or agency of any of the foregoing, or any person, firm,
association, corporation, joint-stock company, syndicate, trust, or other
entity, and to exercise, insofar as may be permitted by any general or
special law of any state or body politic, the right of eminent domain.
4. To take, purchase, invest in, lease, sublease or
otherwise acquire improved and unimproved real property (including without
limitation property granted to it by any government or individual and property
deemed suitable for, or for use in connection with, the production of oil,
gas, coal or other minerals and timber or other natural resources), and
any interest of any kind therein, and to own, improve, develop, manage,
mortgage, lease, sublease, sell or otherwise dispose of any real property or
interest therein now owned or hereafter acquired by the corporation, and to
build, rebuild, alter, improve and remove any buildings or other structures on
real property now or hereafter owned by the corporation, or in which the
corporation holds or shall hereafter hold any interest, and to engage in any
and all branches of the hotel, innkeeping and restaurant business.
5. To drill for, mine, produce, manufacture, refine,
handle and dispose of oil, gas, coal and other minerals, to build, repair and
maintain wells, mines, pipe lines, refineries, plants and other facilities in
connection therewith, and generally to engage in the oil, gas, coal and other
mineral business and all branches thereof.
6. To do a timberland and general lumber and wood
products business in all of the branches thereof, to build, repair and
maintain plants, mills and other facilities in connection therewith, and to
manufacture, own, sell and otherwise dispose of all lumber, lumber products,
pulp, paper, logs and timber of every description.
7. To purchase, invest in, lease, sublease or otherwise
acquire water rights and water supplies and any interest of any kind therein,
and to own, improve, develop, manage, mortgage, lease, sublease, sell or
otherwise dispose of any water rights or water supplies now owned or hereafter
acquired by the corporation, and to build, rebuild, alter, improve and remove
any pipe lines, reservoirs, dams, ditches and appurtenances useful or
necessary in connection with the ownership, improvement, development or
management of such water rights and water supplies.
-2-
<PAGE> 4
8. To engage in the elevator business, the warehouse
business and in any service business of any kind or character whatsoever which
may lawfully be performed by a Delaware corporation.
9. To manufacture, purchase, invest in, lease,
sublease or otherwise acquire and to own, mortgage, lease, sublease, sell or
otherwise dispose of, and to trade, deal in and deal with, goods, wares and
merchandise and personal property of every class and description.
10. To purchase, subscribe for, 1ease, sublease or
otherwise acquire and to own, hold for investment, mortgage, pledge, lease,
sublease or otherwise dispose of the stocks, bonds, debentures, notes, bank
acceptances and other evidences of indebtedness or other securities of any
person, firm, association, corporation, joint-stock company, syndicate, trust,
government or body politic, and to loan and advance money upon mortgages on
real property and pledges of personal property or upon either of them, whether
the objective of any of the foregoing be current income or gain in capital or
principal or acquisition of interests useful in the business of the
corporation.
11. To promote, finance, aid or assist, financially
or otherwise, in any manner, whether by loan, subsidy, guaranty or
otherwise, those issuing or having power to issue, creating or responsible
for any securities referred to in the foregoing paragraph 10, or those in whose
business or affairs the corporation shall have an interest, and in connection
therewith to guarantee or become surety for the performance of any undertaking
or obligation or the payment of dividends on stock.
12. To enter into, make and perform contracts of every
kind and description, with any person, firm, association, corporation,
joint-stock company, syndicate, trust, body politic or any other entity.
13. To borrow money and from time to time to
make, accept, endorse, execute and issue bonds, debentures, promissory notes,
bills of exchange, or other evidences of indebtedness of the corporation for
moneys borrowed or in payment for property acquired, or for any of the
other objects or purposes of the corporation or its business, and to secure the
payment of any such evidences of indebtedness by mortgage, pledge, deed,
indenture, agreement or other instrument of trust, or by other lien upon,
assignment of or agreement with regard to, all or any part of the property,
real or personal, or rights or privileges of the corporation wherever
situated, whether now owned or hereafter to be acquired, or to make,
accept, endorse, execute and issue
-3-
<PAGE> 5
bonds, debentures, promissory notes, bills of exchange, or other evidences of
indebtedness without any such security, and to sell, pledge or otherwise
dispose of any or all such bonds, debentures, promissory notes, bills of
exchange, or other evidences of indebtedness.
14. To purchase, invest in, lease, sublease or otherwise
acquire and to own, grant licenses in respect of, mortgage, lease, sublease,
sell or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating
to or useful in connection with any business of the corporation.
15. To purchase, lease, sublease or otherwise acquire
and to own, mortgage, pledge, lease, sublease, sell or otherwise dispose of,
and deal in and with, shares of its own capital stock and its bonds,
debentures, other evidences of indebtedness and other securities to the extent
permitted by the laws of the State of Delaware.
16. To have one or more offices, and to carry on all or
any of its operations and business in any of the states, districts,
territories or possessions of the United States, and in any and all foreign
countries, subject to applicable law.
17. To engage in any other lawful business for the
transaction of which corporations may be organized under the General Corporation
Law of the State of Delaware and to have and exercise all the powers conferred
by the laws of Delaware upon corporations formed under the General Corporation
Law of the State of Delaware, and to do any or all of the things hereinbefore
set forth to the same extent as any natural person might or could do, and to
exercise any of the aforesaid powers, directly or through one or more
subsidiaries, domestic or foreign, by itself or in collaboration with others.
Notwithstanding any other provision contained herein, the
corporation shall not be authorized to construct, maintain or operate
public utilities within the State of Delaware.
The provisions of this Article Third shall be construed
both as purposes and powers and each as an independent purpose and power. The
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the corporation, and the
purposes and powers therein specified shall be in nowise limited or restricted
by reference to, or inference
-4-
<PAGE> 6
from, the terms of any provision of this or any other Article of this
Certificate of Incorporation.
FOURTH: The total number of all classes of stock which the
corporation shall have authority to issue is 1,000 shares which shall be Common
Stock without par value.
1. At all times each holder of Common Stock of the
corporation shall be entitled to one vote for each share of such Stock standing
in the name of such holder on the books of the corporation.
2. No holder of the Common Stock as such shall have any
pre-emptive right to subscribe to stock, obligations, warrants, right to
subscribe to stock or other securities of the corporation of any class,
whether now or hereafter authorized.
FIFTH: The minimum amount of capital with which the
corporation will commence business is one thousand dollars ($l,000.00).
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall
not be subject to the payment of corporate debts to any extent whatever.
EIGHTH: The number of directors of the corporation
shall be as from time to time fixed by, or in the manner provided in, its
By-Laws and may be increased or decreased as therein provided, but the number
thereof shall not be less than three.
NINTH: In furtherance and not in limitation of the
powers conferred by law, the Board of Directors is expressly
authorized:
1. To make, amend or repeal the By-Laws of the
corporation subject to the power of the stockholders of the corporation having
voting power to amend or repeal By-Laws made or amended by the Board of
Directors.
2. To remove at any time any officer elected or
appointed by the Board of Directors by such vote of the Board of
Directors as may be provided for in the By-Laws. Any other officer of the
corporation may be removed at any time by a vote of the Board of Directors, or
by any committee or superior officer upon whom such power of removal may be
conferred by the By-Laws or by a vote of the Board of Directors.
-5-
<PAGE> 7
3. To establish bonus, profit sharing, stock option,
stock purchase, retirement or other types of incentive or compensation plans
for the employees (including officers and directors) of the corporation and
to fix the terms of such plans and to determine, or prescribe the method for
determining, the persons to participate in any such plans and the amount of
their respective participations.
4. From time to time to determine whether and to what
extent, and at what time and places and under what conditions and regulations,
the accounts and books of the corporation (other than the stock ledger) or any
of them, shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any account or book or document of the
corporation, except as conferred by the laws of the State of Delaware or as
authorized by the Board of Directors.
5. To authorize, and to cause to be executed
mortages, pledges, liens and charges upon the real and personal property of the
corporation and to issue obligations secured thereby.
Both stockholders and directors shall have power to hold
their meetings, and the corporation may have one or more offices, within or
without the State of Delaware, and the books of the corporation may, subject
to the laws of the State of Delaware, be kept outside of such State at such
places as may be from time to time determined by the Board of Directors.
TENTH: No contract or other transaction between the
corporation and any other corporation and no other act of the corporation
with relation to any other corporation shall, in the absence of fraud, in any
way be invalidated or otherwise affected by the fact that any one or more of
the directors of the corporation are pecuniarily or otherwise interested in,
or are directors or officers of, such other corporation. Any director of the
corporation individually, or any firm or association of which any director
may be a member, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the corporation, provided that
the fact that he individually or as a member of such firm or association is
such a party or so interested shall be disclosed or shall have been known to
the Board of Directors; and any director of the corporation who is such a
party or so interested may be counted in determining the existence of a
quorum at any meeting of the Board of Directors which shall authorize any such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested. Any
director of the corporation may vote upon
-6-
<PAGE> 8
any contract or other transaction between the corporation and any subsidiary
or affiliated corporation without regard to the fact that he is also a
director, officer or employee of such subsidiary or affiliated corporation.
ELEVENTH:
1. To the full extent that the Delaware General
Corporation Law, as it exists on the date hereof or may hereafter be amended,
permits the limitation or elimination of the liability of directors, a
director of the corporation shall not be liable to the corporation or its
stockholders for-monetary damages for breach of fiduciary duty as a director.
Any amendment to or repeal of this Section of this Article shall not
adversely affect any right or protection of a director of the corporation
for or with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
2. Each person who was or is made a party or is
threatened to be made a party to or is involved (including, without
limitation, as a witness) in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was
a director or officer of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the full extent authorized
by the Delaware General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment), or by other applicable law as then in effect, against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such indemnitee in connection therewith
and such indemnification shall continue as to an indemnitee who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of
the indemnitee's heirs, executors and administrators; provided, however, that
except as provided in Section 3 of this Article with respect to proceedings
seeking to enforce rights to indemnification, the corporation shall
-7-
<PAGE> 9
indemnify any such indemnitee seeking indemnification in connection with
a proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
corporation. The right to indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that
if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee while a director or officer, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
corporation of an undertaking, by on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined that such
indemnitee is not entitled to be indemnified under this Section 2, or
otherwise.
3. If a claim under Section 2 of this Article is not
paid in full by the corporation within sixty days after a written claim has
been received by the corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the indemnitee shall be entitled to be paid
also the expense of prosecuting such suit. The indemnitee shall be presumed
to be entitled to indemnification under this Article upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any is required, has been
tendered to the corporation), and thereafter the corporation shall have the
burden of proof to overcome the presumption that the indemnitee is not so
entitled. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the indemnitee is not entitled to indemnification
shall be a defense to the suit or create a presumption that the indemnitee is
not so entitled.
4. The rights to indemnification and to the advancement
of expenses conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the
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<PAGE> 10
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
5. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law. The
corporation may enter into contracts with any indemnitee in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
6. Any person who is or was serving as a director or
officer of a wholly owned subsidiary of the corporation shall be deemed, for
purposes of this Article only, to be a director or officer of the corporation
entitled to indemnification under this Article.
7. The corporation may, by action of its Board of
Directors from time to time, grant rights to indemnification and advancement
of expenses to employees and agents of the corporation with the same scope and
effect as the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.
TWELFTH: The corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by the laws of the
State of Delaware, and all rights conferred upon stockholders therein
are granted subject to this reservation.
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<PAGE> 11
EXHIBIT B
BY-LAWS OF
BURLINGTON NORTHERN RAILROAD COMPANY
(Amended July 17, 1991)
<PAGE> 12
BY-LAWS
OF
BURLINGTON NORTHERN RAILROAD COMPANY
(Amended July 17, 1991)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
OFFICES PAGE
------- ----
<S> <C> <C>
ARTICLE I.
Section 1 - Registered Office and Agent ................ 1
Section 2 - Other Offices .............................. 1
ARTICLE II. MEETINGS OF STOCKHOLDERS 1
Section 1 - Annual Meetings ............................ 1
Section 2 - Special Meetings ........................... 1
Section 3 - Place of Meetings .......................... 2
Section 4 - Notice of Meetings ......................... 2
Section 5 - Quorum ..................................... 2
Section 6 - Organization ............................... 3
Section 7 - Voting ..................................... 3
Section 8 - Inspectors ................................. 3
Section 9 - List of Stockholders ....................... 3
ARTICLE III. BOARD OF DIRECTORS 4
Section 1 - Number, Qualification and Term of
Office ................................... 4
Section 2 - Vacancies .................................. 4
Section 3 - Resignations ............................... 4
Section 4 - Removals ................................... 4
Section 5 - Place of Meetings; Books & Records ......... 5
Section 6 - Annual Meeting of the Board ................ 5
Section 7 - Regular Meetings ........................... 5
Section 8 - Special Meetings ........................... 5
Section 9 - Quorum and Manner of Acting ................ 5
Section 10 - Organization ............................... 6
Section 11 - Consent of Directors in Lieu of
Meeting .................................. 6
Section 12 - Telephonic Meetings ........................ 6
Section 13 - Compensation ............................... 6
</TABLE>
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<PAGE> 13
<TABLE>
<S> <C> <C>
ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS 6
Section 1 - Executive Committee ............................. 6
Section 2 - Alternates ...................................... 7
Section 3 - Other Committees ................................ 7
ARTICLE V. OFFICERS 8
Section 1 - Elected Officers ................................ 8
Section 2 - Appointed Officers .............................. 8
Section 3 - Resignations .................................... 8
Section 4 - Removals ........................................ 8
Section 5 - Vacancies ....................................... 8
Section 6 - Compensation of Officers ........................ 9
Section 7 - Chairman of the Board ........................... 9
Section 8 - President ....................................... 9
Section 9 - Vice President, Law ............................. 9
Section 10 - Secretary ....................................... 9
Section 11 - Treasurer ....................................... 10
Section 12 - Absence or Disability of Officers ............... 10
ARTICLE VI. STOCK CERTIFICATES AND TRANSFER THEREOF 10
Section 1 - Stock Certificates .............................. 10
Section 2 - Designation of Preferences ...................... 11
Section 3 - Transfer of Stock ............................... 11
Section 4 - Transfer Agent and Registrar .................... 11
Section 5 - Additional Regulations .......................... 11
Section 6 - Lost, Destroyed or Mutilated Certificates ....... 11
Section 7 - Record Date ..................................... 12
ARTICLE VII. DIVIDENDS, SURPLUS, ETC. 12
ARTICLE VIII. SEAL 12
ARTICLE IX. FISCAL YEAR 13
ARTICLE X. NOTICES 13
ARTICLE XI. CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 13
Section 1 - Checks, Drafts, Etc.; Loans ..................... 13
Section - Deposits ........................................ 13
ARTICLE XII. AMENDMENTS 14
</TABLE>
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<PAGE> 14
BY-LAWS
OF
BURLINGTON NORTHERN RAILROAD COMPANY
(AMENDED JULY 17, 1991)
ARTICLE I.
OFFICES.
Section 1. -- Registered Office and Agent.
The registered office of the Corporation is located at 100 West
10th Street in the City of Wilmington, County of New Castle, State of
Delaware, and the name of its registered agent at such address is The
Corporation Trust Company.
Section 2. -- Other Offices.
The Corporation may have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS.
Section. 1. -- Annual Meetings.
A meeting of the stockholders for the purpose of electing
Directors and for the transaction of such other business as may properly be
brought before the meeting shall be held annually at ten o'clock a.m. on the
second Thursday of May, or at such other time on such other day as shall be
fixed by resolution of the Board of Directors. If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day.
Section 2. -- Special Meetings.
Special meetings of the stockholders for any purpose or purposes
may be called at any time by a majority of the Board of Directors or by the
Chairman of the Board, and shall be called by the Secretary at the request of
the holders of not less than one-third of all issued and outstanding shares of
the Corporation entitled to vote at the meeting.
<PAGE> 15
Section 3. -- Place of Meetings.
The annual meeting of the stockholders of the Corporation shall be
held at the general offices of the Corporation in the City of Fort Worth, State
of Texas, or at such other place in the United States as may be stated in the
notice of the meeting. All other meetings of the stockholders shall be held at
such places within or without the State of Delaware as shall be stated in the
notice of the meeting. Amended 2/15/90, effective 2/15/90.
Section 4. -- Notice of Meetings.
Except as otherwise provided by statute, written notice of each
meeting of the stockholders, whether annual or special, shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice will be given
when deposited in the United States mail, postage prepaid, directed to such
stockholder at his address as it appears in the stock ledger of the
Corporation. Each such 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.
When a meeting is adjourned to another time and place, notice of the
adjourned meeting need not be given if the time and place thereof are announced
at the meeting at which the adjournment is given. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 5. -- Quorum.
At any meeting of the stockholders, the holders of record of a
majority of the total number of outstanding shares of stock of the Corporation
entitled to vote, present in person or represented by proxy, shall constitute a
quorum for all purposes, provided that at any meeting at which the holders of
any series or class of stock shall be entitled, voting as a class, to elect
Directors, the holders of record of a majority of the total number of
outstanding shares of such series or class, present in person or represented by
proxy, shall constitute a quorum for the purpose of such election.
If a quorum is present at any meeting of stockholders, the vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote at the meeting shall be sufficient for the
transaction of any business, unless otherwise provided by statute or the
Restated Certificate of Incorporation.
In the absence of a quorum at any meeting, the holders of a majority
of the shares of stock entitled to vote thereat, present in person or
represented by proxy at the meeting, may adjourn the meeting, from time to
time, until the holders of the number of shares requisite to constitute a
quorum shall be present in person or represented at the meeting. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted at the meeting as originally convened.
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<PAGE> 16
Section 6. -- Organization.
At each meeting of the stockholders, the Chairman of the Board, or
in his absence such person as shall have been designated by the Board of
Directors, or in the absence of such designation a person elected by the
holders of a majority in number of shares of stock present in person or
represented by proxy and entitled to vote, shall act as Chairman of the
meeting.
The Secretary, or in his absence, an Assistant Secretary or, in the
absence of the Secretary and all of the Assistant Secretaries, any person
appointed by the Chairman of the meeting, shall act as Secretary of the
meeting.
Section 7. -- Voting.
At each meeting of the stockholders, each holder of shares of any
series or class of stock entitled to vote at such meeting shall be entitled to
one vote for each share of stock having voting power in respect of each matter
upon which a vote is to be taken, standing in his name on the stock ledger of
the corporation on the record date fixed as provided in these By-Laws for
determining the stockholders entitled to vote at such meeting or, if nor record
date be fixed, at the close of business on the day next preceding the day on
which notice of the meeting is given. Shares of its own capital stock belonging
to the Corporation, or to another Corporation if a majority of the shares
entitled to vote the election of Directors of such other Corporation is held
by the Corporation, shall neither be entitled to vote nor counted for quorum
purposes.
At each election of Directors the voting shall be by ballot, and
the persons having the greatest number of votes shall be deemed and declared
elected. Except as otherwise required by statute, the Restated Certificate of
Incorporation or these By-Laws, all matters shall be decided by a majority of
the votes cast, a quorum being present.
Section 8. -- Inspectors.
Prior to each meeting of stockholders, the Board of Directors shall
appoint two Inspectors who are not Directors, candidates for Directors or
officers of the Corporation, who shall receive and determine the validity of
proxies and the qualifications of voters, and receive, inspect, count and
report to the meeting in writing the votes cast on all matters submitted to a
vote at such meeting. In case of failure of the Board of Directors to make such
appointments or in case of failure of any Inspector so appointed to act, the
Chairman of the Board shall make such appointment or fill such vacancies.
Each Inspector, immediately before entering upon his duties, shall
subscribe to an oath or affirmation faithfully to execute the duties of
Inspector at such meeting with strict impartiality and according to the best of
his ability.
Section 9. -- List of stockholders.
The Secretary or other officer or agent having charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at said meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares of each class and series
registered in the name of each such
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<PAGE> 17
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. Such list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list
required by this Section, or the books of the Corporation, or to vote in person
or by proxy at any such meeting.
ARTICLE III.
BOARD OF DIRECTORS.
Section 1. -- Number, Qualification and Term of Office.
The business, property and affairs of the Corporation shall be
managed by a Board consisting of not less than three nor more than seven
Directors. The Board of Directors shall from time to time by a vote of a
majority of the Directors then in office fix within the maximum and minimum
limits the number of Directors to constitute the Board. At each annual meeting
of stockholders a Board of Directors shall be elected by the stockholders for a
term of one year. Each person elected as a Director shall forthwith be notified
of his election by the Secretary. Each Director shall serve until his successor
is elected and shall qualify. Amended 1/24/83, effective 2/1/83. Amended
2/15/90, effective 2/15/90.
Section 2. -- Vacancies.
Vacancies in the Board of Directors and newly created Directorships
resulting from any increase in the authorized number of Directors may be filled
by a majoritv of the Directors then in office, although less than a quorum, or
by a sole remaining Director, at any regular or special meeting of the Board of
Directors.
Section 3. -- Resignations.
Any Director may resign at any time upon written notice to the
Secretary of the Corporation. Such resignation shall take effect on the date of
receipt of such notice or at any later date specified therein; and the
acceptance of such resignation, unless required by the terms thereof, shall not
be necessary to make it effective. When one or more Directors shall resign
effective at a future date, a majority of the Directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies to take effect when such resignation or resignations shall become
effective.
Section 4. -- Removals.
Any director may be removed, with cause, at any special meeting of
the stockholders called for that purpose, by the affirmative vote of the
holders of a majority in number of shares of the Corporation entitled to vote
for the election of Directors, and the vacancy in the Board caused by any such
removal may be filled by the stockholders at such meeting.
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<PAGE> 18
Section 5. -- Place of Meetings; Books and Records.
The Board of Directors may hold its meetings, and have an office or
offices, at such place or places within or without the State of Delaware as the
Board from time to time may determine, unless otherwise provided the Restated
Certificate of Incorporation or in these By-Laws.
The Board of Directors, subject to the provisions of the laws of
Delaware, may authorize the books and records of the Corporation, and offices
or agencies for the issue, transfer and registration of the capital stock of
the Corporation, to be kept at such place or places outside of the State of
Delaware as, from time to time, may be designated by the Board of Directors.
Section 6. -- Annual Meeting of the Board.
The first meeting of each newly elected Board of Directors, to be
known as the Annual Meeting of the Board, for the purpose of electing officers,
designating committees and the transaction of such other business as may come
before the Board, shall be held at the same place as and immediately after the
adjournment of the annual meeting of stockholders, and no notice of such meeting
shall be necessary to the newly elected Directors in order legally to
constitute the meeting, provided a quorum shall be present. In the event such
meeting is not held due to the absence of a quorum, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the newly elected Directors.
Section 7. -- Regular Meetings.
The Board of Directors shall, by resolution, provide for regular
meetings of the Board at such times and at such places as it deems desirable.
Notice of regular meetings need not be given.
Section 8. -- Special Meetings.
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President and shall be called by the Secretary on
the written request of three Directors on such notice as the person or persons
calling the meeting shall deem appropriate in the circumstances. Notice of each
such special meeting shall be mailed to each Director or sent to him by
telephone, telegraph, cable or wireless, in each case addressed to his
residence or usual place of business, or delivered to him in person or given to
him orally. The notice of meeting shall state the time and place of the meeting
but need not state the purpose thereof. Attendance of a Director at any
meeting shall constitute a waiver of notice of such meeting except when a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 9. -- Quorum and Manner of Acting.
Except as otherwise provided by the laws of Delaware, the Restated
Certificate of Incorporation, or these By-Laws, the presence of a majority of
the total number of Directors shall constitute a quorum for the transaction of
business
-5-
<PAGE> 19
at any regular or special meeting of the Board of Directors, and the act of a
majority of the Directors present at any such meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a
quorum, a majority of the Directors present may adjourn the meeting, from time
to time, until a quorum is present. Notice of any such adjourned meeting need
not be given.
Section 10. -- Organization.
At every meeting of the Board of Directors, the Chairman of the
Board, or in his absence, the President and/or, if both of the said officers
are absent, a Chairman chosen by a majority of the Directors present shall act
as Chairman of the meeting. The Secretary, or in his absence, an Assistant
Secretary, or in the absence of the Secretary and all the Assistant
Secretaries, any person appointed by the Chairman of the meeting, shall act as
Secretary of the meeting.
Section 11. -- Consent of Directors in Lieu of Meeting.
Unless otherwise restricted by the Restated Certificate of
Incorporation or by these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors, or any committee designated by the
Board, may be taken without a meeting if all members of the Board or committee
consent thereto in writing, and such written consent is filed with the minutes
of the proceedings of the Board or committee.
Section 12. -- Telephonic Meetings.
Members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or 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 provision shall constitute presence in person at
such meeting.
Section 13. -- Compensation.
Each Director, who is not a full-time salaried officer of the
Corporation or its parent, or a subsidiary or affiliated corporation, when
authorized by resolution of the Board of Directors may receive as a Director a
stated salary or an annual retainer and in addition may be allowed a fixed fee
and his reasonable expenses for attendance at each regular or special meeting
of the Board or any Committee thereof. No fuII-time salaried officer of the
Corporation shall receive compensation for serving as a Director of any of the
Corporation's wholly-owned subsidiaries. Amended 2/15/90, effective 2/15/90.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS.
Section 1. -- Executive Committee.
The Board of Directors may, in its discretion, designate annuaIly
an Executive Committee consisting of not less than three Directors as it may
from time
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<PAGE> 20
to time determine. The Committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it, but the Committee shall have no
power or authority to amend the Certificate of Incorporation, adopt an
agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all the Corporation's property and
assets, recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, amend the By-Laws of the Corporation, eject
officers or fill vacancies on the Board of Directors or any Committee of the
Board, declare a dividend, authorize the issuance of stock, or such other
powers as the Board may from time to time eliminate.
At each meeting of the Committee, the presence of a majority of the
members of the Committee, whether regular or alternate, shall be necessary to
constitute a quorum for the transaction of business, and if a quorum is
present, the concurrence of a majority of those present shall be necessary for
the taking of any action.
The Committee shall elect a Chairman to serve for such term as it
may determine, shall fix its own rules of procedure and shall meet at such
times and places and upon such call or notice as shall be provided by such
rules. It shall keep a record of its acts and proceedings, and all actions of
the committee shall be reported to the Board of Directors at the next meeting
of the Board. Amended 1/24/83, effective 2/1/83.
Section 2.-- Alternates.
Alternate members of any committee may be designated by the Board of
Directors from among the Directors to serve as occasion may require. Whenever a
quorum cannot be secured for any Committee meeting from among the regular
members thereof and designated alternates, the member or members of such
Committee present at such meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of such absent or disqualified
member.
Alternate members of a Committee shall receive reimbursement for
expenses and compensation at the same rate as a regular member of such
Committee.
Section 3. -- Other Committees.
The Board of Directors may elect such other Committees, each to
consist of two or more Directors, as it may from time to time determine, and
each such Committee shall serve for such term and shall have and may exercise,
during intervals between meetings of the Board of Directors, such duties,
functions and powers as the Board of Directors may from time to time prescribe.
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<PAGE> 21
ARTICLE V.
OFFICERS.
Section 1.-- Elected Officers.
The officers of the Corporation shall be a Chairman of the Board,
a Vice President and Chief Financial Officer, a Vice President, Law, a
Secretary, a Treasurer, and such other officers as may be elected or appointed
by the Board of Directors. Any number of offices may be held by the same
person. Any officer may hold such additional title descriptions or qualifiers
such as "Chief Executive Officer", "Chief Operating Officer", "Senior
Vice President", "Executive Vice President" or "Assistant Secretary" or such
other title as the Board of Directors shall determine. In addition, at the
discretion of the Board of Directors, a President may be, but need not be,
elected. Amended 6/1/83, effective 6/1/83. Amended 2/15/90, effective
2/15/90. Amended 7/17/91, effective 7/17/91.
Section 2.-- Appointed Officers.
In addition to the elected officers of the Corporation, the
Corporation shall have such other Vice Presidents and officers as may be
appointed by the Chairman of the Board. Any number of offices may be held by
the same person. The exact title held by each appointed officer or Vice
President may contain such modifiers, such as "senior", "executive" or
"assistant", and/or titles, such as "chief executive officer", "chief operating
officer", "chief financial officer", "chief accounting officer" or
"comptroller", as the Chairman, in his discretion, may bestow. In addition, at
the discretion of the Chairman, a President may, but need not be, appointed by
the Chairman. Each appointed officer, unless removed in the manner hereinafter
provided, shall hold office until his successor shall have been duly appointed
and qualified, or until he shall have died, resigned or been removed in the
manner hereinafter provided. Amended 2/25/90, effective 2/15/90. Amended
7/17/91, effective 7/17/91.
Section 3.-- Resignations.
Any officer may resign at any time upon written notice to the
Secretary of the Corporation. Such resignation shall take effect at the date of
its receipt, or at any later date specified therein; and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary to
make it effective.
Section 4. -- Removals.
Any officer elected or appointed by the Board of Directors may be
removed, either with or without cause, by the Board of Directors at a regular
or special meeting of the Board. Any officer or agent appointed by any officer
or committee may be removed, either with or without cause, by such appointing
officer or committee.
Section 5.-- Vacancies.
Any vacancy occurring in any office of the Corporation by reason
of death, retirement, resignation, removal, or otherwise shall be filled for
the unexpired
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<PAGE> 22
portion of the term in the same manner as prescribed in these By-Laws for
regular election or appointment to such office.
Section 6. -- Compensation of Officers.
The compensation of all officers elected by the Board of Directors
and of all other officers whose compensation is prescribed by the Board of
Directors shall be fixed from time to time by the Board of Directors, by any
committee thereof upon whom such power may be conferred by the Board of
Directors, or by the Chairman when so authorized by the Board of Directors.
Amended 1/24/83, effective 2/1/83. Amended 2/15/90, effective 2/15/90.
Section 7. -- Chairman of the Board.
The Chairman of the Board shall have general authority over the
property, business and affairs of the Corporation and over all other officers,
agents and employees of the Corporation, subject to the control and direction
of the Board of Directors including the power to sign and acknowledge in the
name and on behalf of the Corporation, all stock certificates, contracts or
other documents and instruments, except when the signing thereof shall have
been expressly delegated to some other officer or agent, or required by law to
be otherwise signed or executed, and unless otherwise provided by law or by the
Board, may authorize any officer, employee or agent of the Corporation to sign,
execute and acknowledge in his place and stead all such documents and
instruments; and he shall preside at all meetings of the Board and have
authority to call special meetings of the Board or committees of the Board. He
shall have power to appoint Vice Presidents and other officers not elected by
the Board of Directors and shall have such other powers and perform such other
duties as may be assigned to him by the Board of Directors. He shall have power
to delegate to other officers of the Corporation, through written delegations or
otherwise, such authority to transact the business affairs of the Corporation.
Adopted 1/24/83, effective 2/1/83. Amended 2/15/90, effective 2/15/90.
Section 8.-- President.
When a President is elected or appointed, he or she shall, during
the absence or disability of the Chairman of the Board, perform the powers and
duties of that office and shall have other duties as may be assigned to him or
her by the Board of Directors or by the Chairman of the Board. Adopted 1/24/83,
effective 2/1/83. Amended 2/15/90, effective 2/15/90. Amended 7/17/91,
effective 7/17/91.
Section 9. -- Vice President, Law.
The Vice President, Law shall be the chief legal advisor of the
Corporation and shall have charge of the management and direction of the legal
affairs and litigation of the Corporation. In addition, such officer shall be
responsible for all government relations and legislative activities of the
Corporation. Amended 6/1/83, effective 6/1/83. Amended 2/15/90, effective
2/15/90. Amended 7/17/91, effective 7/17/91.
Section 10.-- Secretary.
The Secretary shall attend and keep minutes of meetings of the
stockholders and Directors, and of all committees of the Board of Directors, in
books of the
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<PAGE> 23
Corporation provided for that purpose; shall have custody of the corporate
records of the Corporation; shall see that notices are given and records and
reports properly kept and filed by the Corporation, as required bv the By-Laws
or as required by law; shall be the custodian of the corporate seal of the
Corporation and see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and in general, shall have such other
powers and perform such other duties as are incident to the office of Secretany
and as may from time to time be assigned to him by the Board of Directors, the
Chairman of the Board or the President.
Section 11. -- Treasurer.
The Treasurer shall have responsibilitv for the custody and
safekeeping of all funds of the Corporation and shall have charge of their
collection, receipt and disbursement; shall receive and have authority to sign
receipts for all monies paid to the Corporation and shall deposit the same in
the name and to the credit of the Corporation in such banks or depositories as
the Board of Directors shall approve; shall endorse for collection on behalf
of the Corporation all checks, drafts, notes and other obligations payable to
the Corporation; shall disburse the funds of the Corporation only in such
manner as provided in the By-Laws or as the Board of Directors may require;
shall sign or countersign all notes, endorsements, guarantees and acceptances
made on behalf of the Corporation when and as directed by the Board of
Directors; shall keep full and accurate accounts of the transactions in his
office in books belonging to the Corporation and render to the Board of
Directors whenever it may require an account of his transactions as Treasurer;
shall give bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors may require; shall have the
responsibility for the custody and safekeeping of all securities of the
Corporation; and in general, shall have such other power and perform such other
duties as are incident to the office of Treasurer and as from time to time may
be prescribed by the Board of Directors, or be delegated to him by the Chairman
of the Board or by the President or by their designees. Amended 2/15/90,
Effective 2/15/90.
Section 12. -- Absence or Disability of Officers.
In the absence or disability of the Chairman of the Board or the
President, the Board of Directors may designate, by resolution, individuals to
perform the duties of those absent or disabled. The Board of Directors may also
delegate this power to a committee or to a senior corporate officer. Amended
1/24/83, Effective 2/1/83.
ARTICLE VI.
STOCK CERTIFICATES AND TRANSFER THEREOF.
Section 1. -- Stock Certificates.
Every holder of stock in the Corporation shall be entitled to have
a certificate, signed by or in the name of the Corporation by the Chairman of
the Board, the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares, and the class and series thereof,
owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In
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<PAGE> 24
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 2. -- Designation of Preferences.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, except that in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and rights.
Section 3. - Transfer of Stock.
Transfer of shares of the capital stock of the Corporation shall be
made only on the books of the Corporation by the holder thereof, or by his
attorney thereunto duly authorized, and on surrender of the certificate or
certificates for such shares. A person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof as regards the
Corporation, and the Corporation shall not, except as expressly required by
statute, be bound to recognize any equitable or other claim to, or interest in,
such shares on the part of any other person whether or not it shall have
express or other notice thereof.
Section 4.-- Transfer Agent and Registrar.
The Corporation may, if and whenever the Board of Directors shall so
determine, maintain in such place or places as the Board shall so determine,
one or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board where the shares of the Capital stock of the
Corporation of any class or classes shall be transferable, and also one or more
registry offices, each in charge of a registrar designated by the Board of
Directors, where such shares of stock of any class or classes shall be
registered. Amended 1/24/83, effective 2/1/83.
Section 5. -- Additional Regulations.
The Board of Directors may make such additional rules and regulations
as it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Corporation.
Section 6.-- Lost, Destroyed or Mutilated Certificates.
The holder of any stock of the Corporation shall immediately notify
the Corporation of any loss, theft, destruction or mutilation of the
certificate therefor, and the Board of Directors may, in its discretion, cause
a new certificate to be issued to him in case of mutilation of the certificate
upon surrender of the mutilated
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<PAGE> 25
certificate, or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss or destruction, and in any case, if the Board
of Directors shall so determine, upon the delivery of a bond in such form and
sum, and with such surety or sureties, as the Board of Directors may direct, to
indemnify the Corporation and its agent against any claim that may be made
against it or them on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 7 - Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
Except as otherwise provided by statute or the Restated Certificate of
Incorporation, the Board of Directors may declare dividends upon the shares of
its capital stock either (1) out of its surplus, or (2) in case there shall be
no such surplus, out of its net profits for the fiscal year in which the
dividend is declared or its preceding fiscal year, whenever, and in such
amounts as, in its opinion, the condition of the affairs of the Corporation
shall render it advisable. Dividends may be paid in cash, in property, or in
shares of the capital stock of the Corporation. The Board of Directors may use
and apply any of such surplus or net profits in purchasing or acquiring any of
the bonds, debentures, notes, scrip, other securities or evidences of
indebtedness of the Corporation or of any of its controlled or subsidiary
corporations, or may set apart from any of the funds of the Corporation
available for dividends such sum or sums as it, in its absolute discretion, may
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for the purpose of maintaining or increasing the property or
business of the Corporation, or for any other purpose it may think conducive to
the best interests of the Corporation. The Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE VIII.
SEAL.
The Board of Directors shall adopt a suitable corporate seal which
shall be in the form imprinted hereon. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
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<PAGE> 26
ARTICLE IX.
FISCAL YEAR.
The fiscal year of the Corporation shall begin on the first day of
January of each year.
ARTICLE X.
NOTICES.
Notices to stockholders and Directors shall be given in the manner and
form hereinbefore provided, and (a) if given by mail shall be deemed to be
given at the time deposited in the United States mail, enclosed in a sealed
envelope properly addressed and postage prepaid, and (b) if given by telegraph,
cable or wireless shall be deemed to be given at the time delivered to a
representative of a telegraph, cable or wireless company, as the case may be,
properly addressed, with instructions that it be transmitted.
Whenever any notice is required to be given under the provisions of
the statute, the Restated Certificate of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE XI.
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1.-- Checks, Drafts, Etc.; Loans.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation and in
such manner as shall, from time to time, be determined by resolution of the
Board of Directors. No loans shall be contracted on behalf of the Corporation
unless authorized by the Board of Directors.
Section 2. -- Deposits.
All funds of the Corporation shall be deposited, from time to time, to
the credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may select, or as may be selected by any
officer or officers, agent or agents of the Corporation to whom such power may,
from time to time, be delegated by the Board of Directors; and for the purpose
of such deposit, the Chairman, the President, any Vice President, the Treasurer
or any Assistant Treasurer, the Secretary or any Assistant Secretary, or any
other officer or agent to whom such power may be delegated by the Board of
Directors, may endorse, assign and deliver checks, drafts and other orders for
the payment of money which are payable to the order of the Corporation. Amended
7/17/91, effective 7/17/91.
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<PAGE> 27
ARTICLE XII.
Amendments.
These By-Laws may be altered or repealed and new By-Laws may be made
by the affirmative vote, at any meeting of the Board, of a majority of the
whole Board of Directors, subject to the right of the stockholders of the
Corporation to amend or repeal By-Laws made or amended by the Board of
Directors by the affirmative vote of the holders of record of a majority in
number of shares of the outstanding stock of the Corporation present or
represented at any meeting of the stockholders and entitled to vote thereon,
provided that notice of the proposed action be included in the notice of such
meeting.
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<PAGE> 1
BURLINGTON
NORTHERN
RAILROAD
BY-LAWS
OF
BURLINGTON NORTHERN RAILROAD COMPANY
AMENDED JULY 17, 1991
<PAGE> 2
BY-LAWS
OF
BURLINGTON NORTHERN RAILROAD COMPANY
(AMENDED JULY 17, 1991)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
OFFICES PAGE
<S> <C> <C>
ARTICLE I.
Section 1 - Registered Office and Agent ................................................. 1
Section 2 - Other Offices ............................................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS 1
Section 1 - Annual Meetings ............................................................. 1
Section 2 - Special Meetings ............................................................ 1
Section 3 - Place of Meetings ........................................................... 2
Section 4 - Notice of Meetings .......................................................... 2
Section 5 - Quorum ...................................................................... 2
Section 6 - Organization ................................................................ 3
Section 7 - Voting ...................................................................... 3
Section 8 - Inspectors ................................................................... 3
Section 9 - List of Stockholders ........................................................ 3
ARTICLE III. BOARD OF DIRECTORS 4
Section 1 - Number, Qualification and Term of
Office ..................................................................... 4
Section 2 - Vacancies ................................................................... 4
Section 3 - Resignations ................................................................. 4
Section 4 - Removals ..................................................................... 4
Section 5 - Place of Meetings; Books & Records............................................ 5
Section 6 - Annual Meeting of the Board ................................................. 5
Section 7 - Regular Meetings ............................................................. 5
Section 8 - Special Meetings ............................................................. 5
Section 9 - Quorum and Manner of Acting ................................................. 5
Section 10 - Organization ................................................................ 6
Section 11 - Consent of Directors in Lieu of
Meeting ..................................................................... 6
Section 12 - Telephonic Meetings .......................................................... 6
Section 13 - Compensation ................................................................ 6
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV. COMMITTEES OF THE BOARD OF
DIRECTORS 6
Section 1 - Executive Committee ...................................................... 6
Section 2 - Alternates ................................................................ 7
Section 3 - Other Committees .......................................................... 7
ARTICLE V. OFFICERS 8
Section 1 - Elected Officers .......................................................... 8
Section 2 - Appointed Officers ........................................................ 8
Section 3 - Resignations ............................................................. 8
Section 4 - Removals .................................................................. 8
Section 5 - Vacancies ................................................................ 8
Section 6 - Compensation of Officers .................................................. 9
Section 7 - Chairman of the Board ..................................................... 9
Section 8 - President ................................................................ 9
Section 9 - Vice President, Law ....................................................... 9
Section 10 - Secretary ................................................................ 9
Section 11 - Treasurer ................................................................ 10
Section 12 - Absence or Disability of Officers ........................................ 10
ARTICLE VI. STOCK CERTIFICATES AND TRANSFER
THEREOF 10
Section 1 - Stock Certificates ....................................................... 10
Section 2 - Designation of Preferences ............................................... 11
Section 3 - Transfer of Stock ........................................................ 11
Section 4 - Transfer Agent and Registrar ............................................. 11
Section 5 - Additional Regulations ................................................... 11
Section 6 - Lost, Destroyed or Mutilated Certificates ................................ 11
Section 7 - Record Date .............................................................. 12
ARTICLE VII. DIVIDENDS, SURPLUS, ETC. 12
ARTICLE VIII. SEAL 12
ARTICLE IX. FISCAL YEAR 13
ARTICLE X. NOTICES 13
ARTICLE XI. CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 13
Section 1 - Checks, Drafts, Etc.; Loans .............................................. 13
Section - Deposits ................................................................. 13
ARTICLE XII. AMENDMENTS 14
</TABLE>
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<PAGE> 4
BY-LAWS
OF
BURLINGTON NORTHERN RAILROAD COMPANY
(AMENDED JULY 17, 1991)
ARTICLE I.
OFFICES.
Section 1.-- Registered Office and Agent.
The registered office of the Corporation is located at 100 West 10th
Street in the City of Wilmington, County of New Castle, State of Delaware, and
the name of its registered agent at such address is The Corporation Trust
Company.
Section 2. -- Other Offices.
The Corporation may have offices at such other places both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS.
Section 1.-- Annual Meetings.
A meeting of the stockholders for the purpose of electing Directors and
for the transaction of such other business as may properly be brought before
the meeting shall be held annually at ten o'clock a.m. on the second Thursday
of May, or at such other time on such other day as shall be fixed by
resolution of the Board of Directors. If the day fixed for the annual meeting
shall be a legal holiday, such meeting shall be held on the next succeeding
business day.
Section 2. -- Special Meetings.
Special meetings of the stockholders for any purpose or purposes may be
called at any time by a majority of the Board of Directors or by the Chairman
of the Board, and shall be called by the Secretary at the request of the
holders of not less than one-third of all issued and outstanding shares of the
Corporation entitled to vote at the meeting.
<PAGE> 5
Section 3. -- Place of Meetings.
The annual meeting of the stockholders of the Corporation shall be held
at the general offices of the Corporation in the City of Fort Worth, State of
Texas, or at such other place in the United States as may be stated in the
notice of the meeting. All other meetings of the stockholders shall be held
at such places within or without the State of Delaware as shall be stated in
the notice of the meeting. Amended 2/15/90, effective 2/15/90.
Section 4. -- Notice of Meetings.
Except as otherwise provided by statute, written notice of each meeting
of the stockholders, whether annual or special, shall be given not less than
ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice will be given
when deposited in the United States mail, postage prepaid, directed to such
stockholder at his address as it appears in the stock ledger of the
Corporation. Each such 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.
When a meeting is adjourned to another time and place, notice of the
adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is given. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 5. -- Quorum.
At any meeting of the stockholders, the holders of record of a majority
of the total number of outstanding shares of stock of the Corporation
entitled to vote, present in person or represented by proxy, shall constitute
a quorum for all purposes, provided that at any meeting at which the holders
of any series or class of stock shall be entitled, voting as a class, to
elect Directors, the holders of record of a majority of the total number of
outstanding shares of such series or class, present in person or represented
by proxy, shall constitute a quorum for the purpose of such election.
If a quorum is present at any meeting of stockholders, the vote of the
holders of a majority of the shares present in person or represented by proxy
and entitled to vote at the meeting shall be sufficient for the transaction
of any business, unless otherwise provided by statute or the Restated
Certificate of Incorporation.
In the absence of a quorum at any meeting, the holders of a majority of
the shares of stock entitled to vote thereat, present in person or represented
by proxy at the meeting, may adjourn the meeting, from time to time, until
the holders of the number of shares requisite to constitute a quorum shall be
present in person or represented at the meeting. At any adjourned meeting at
which a quorum is present, any business may be transacted that might have
been transacted at the meeting as originally convened.
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<PAGE> 6
Section 6. -- Organization.
At each meeting of the stockholders, the Chairman of the Board, or in his
absence such person as shall have been designated by the Board of Directors, or
in the absence of such designation a person elected by the holders of a
majority in number of shares of stock present in person or represented by proxy
and entitled to vote, shall act as Chairman of the meeting.
The Secretary, or in his absence, an Assistant Secretary or, in the absence
of the Secretary and all of the Assistant Secretaries, any person appointed by
the Chairman of the meeting, shall act as Secretary of the meeting.
Section 7.-- Voting.
At each meeting of the stockholders, each holder of shares of any series or
class of stock entitled to vote at such meeting shall be entitled to one vote
for each share of stock having voting power in respect of each matter upon
which a vote is to be taken, standing in his name on the stock ledger of the
corporation on the record date fixed as provided in these By-Laws for
determining the stockholders entitled to vote at such meeting or, if no record
date be fixed, at the close of business on the day next preceding the day on
which notice of the meeting is given. Shares of its own capital stock belonging
to the Corporation, or to another Corporation if a majority of the shares
entitled to vote in the election of Directors of such other Corporation is held
by the Corporation, shall neither be entitled to vote nor counted for quorum
purposes.
At each election of Directors the voting shall be by ballot, and the
persons having the greatest number of votes shall be deemed and declared
elected. Except as otherwise required by statute, the Restated Certificate of
Incorporation or these By-Laws, all matters shall be decided by a majority of
the votes cast, a quorum being present.
Section 8.-- Inspectors.
Prior to each meeting of stockholders, the Board of Directors shall appoint
two Inspectors who are not Directors, candidates for Directors or officers of
the Corporation, who shall receive and determine the validity of proxies and
the qualifications of voters, and receive, inspect, count and report to the
meeting in writing the votes cast on all matters submitted to a vote at such
meeting. In case of failure of the Board of Directors to make such appointments
or in case of failure of any Inspector so appointed to act, the Chairman of the
Board shall make such appointment or fill such vacancies.
Each Inspector, immediately before entering upon his duties, shall subscribe
to an oath or affirmation faithfully to execute the duties of Inspector at such
meeting with strict impartiality and according to the best of his ability.
Section 9. -- List of stockholders.
The Secretary or other officer or agent having charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at said meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares of each class and series registered in the
name of each such
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<PAGE> 7
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. Such list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list
required by this Section, or the books of the Corporation, or to vote in
person or by proxy at any such meeting.
ARTICLE 111.
BOARD OF DIRECTORS.
Section 1. -- Number, Qualification and Term of Office.
The business, property and affairs of the Corporation shall be managed by
a Board consisting of not less than three nor more than seven Directors. The
Board of Directors shall from time to time by a vote of a majority of the
Directors then in office fix within the maximum and minimum limits the number
of Directors to constitute the Board. At each annual meeting of stockholders a
Board of Directors shall be elected by the stockholders for a term of one
year. Each person elected as a Director shall forthwith be notified of his
election by the Secretary. Each Director shall serve until his successor is
elected and shall qualify. Amended 1/24/83, effective 2/1/83. Amended 2/15/90,
effective 2/15/90.
Section 2.-- Vacancies.
Vacancies in the Board of Directors and newly created Directorships
resulting from any increase in the authorized number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director, at any regular or special meeting of
the Board of Directors.
Section 3. -- Resignations.
Any Director may resign at any time upon written notice to the Secretary
of the Corporation. Such resignation shall take effect on the date of receipt
of such notice or at any later date specified therein; and the acceptance of
such resignation, unless required by the terms thereof, shall not be necessary
to make it effective. When one or more Directors shall resign effective at a
future date, a majority of the Directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies to take
effect when such resignation or resignations shall become effective.
Section 4.-- Removals.
Any director may be removed, with cause, at any special meeting of the
stockholders called for that purpose, by the affirmative vote of the holders
of a majority in number of shares of the Corporation entitled to vote for the
election of Directors, and the vacancy in the Board caused by any such removal
may be filled by the stockholders at such meeting.
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<PAGE> 8
Section 5. -- Place of Meetings; Books and Records.
The Board of Directors may hold its meetings, and have an office or
offices, at such place or places within or without the State of Delaware as
the Board from time to time may determine, unless otherwise provided in the
Restated Certificate of Incorporation or in these By-Laws.
The Board of Directors, subject to the provisions of the laws of Delaware,
may authorize the books and records of the Corporation, and offices or
agencies for the issue, transfer and registration of the capital stock of the
Corporation, to be kept at such place or places outside of the State of
Delaware as, from time to time, may be designated by the Board of Directors.
Section 6.-- Annual Meeting of the Board.
The first meeting of each newly elected Board of Directors, to be known as
the Annual Meeting of the Board, for the purpose of electing officers,
designating committees and the transaction of such other business as may come
before the Board, shall be held at the same place as and immediately after the
adjournment of the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting, provided a quorum shall be present. In the event such
meeting is not held due to the absence of a quorum, the meeting may be held at
such time and place as shall be specifled in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the newly elected Directors.
Section 7.-- Regular Meetings.
The Board of Directors shall, by resolution, provide for regular meetings
of the Board at such times and at such places as it deems desirable. Notice of
regular meetings need not be given.
Section 8. -- Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman
of the Board or the President and shall be called by the Secretary on the
written request of three Directors on such notice as the person or persons
calling the meeting shall deem appropriate in the circumstances. Notice of
each such special meeting shall be mailed to each Director or sent to him by
telephone, telegraph, cable or wireless, in each case addressed to his
residence or usual place of business, or delivered to him in person or given
to him orally. The notice of meeting shall state the time and place of the
meeting but need not state the purpose thereof. Attendance of a Director at
any meeting shall constitute a waiver of notice of such meeting except when a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 9. -- Quorum and Manner of Acting.
Except as otherwise provided by the laws of Delaware, the Restated
Certificate of Incorporation, or these By-Laws, the presence of a majority of
the total number of Directors shall constitute a quorum for the transaction of
business
-5-
<PAGE> 9
at any regular or special meeting of the Board of Directors, and the act of a
majority of the Directors present at any such meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a
quorum, a majority of the Directors present may adjourn the meeting, from time
to time, until a quorum is present. Notice of any such adjourned meeting need
not be given.
Section 10.-- Organization.
At every meeting of the Board of Directors, the Chairman of the Board, or
in his absence, the President and/or, if both of the said officers are absent,
a Chairman chosen by a majority of the Directors present shall act as Chairman
of the meeting. The Secretary, or in his absence, an Assistant Secretary, or
in the absence of the Secretary and all the Assistant Secretaries, any person
appointed by the Chairman of the meeting, shall act as Secretary of the
meeting.
Section 11. -- Consent of Directors in Lieu of Meeting.
Unless otherwise restricted by the Restated Certificate of Incorporation
or by these By-Laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or any committee designated by the Board,
may be taken without a meeting if all members of the Board or committee
consent thereto in writing, and such written consent is filed with the minutes
of the proceedings of the Board or committee.
Section 12. -- Telephonic Meetings.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or 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 provision shall constitute presence in person at
such meeting.
Section 13.-- Compensation.
Each Director, who is not a full-time salaried officer of the
Corporation or its parent, or a subsidiary or affiliated corporation, when
authorized by resolution of the Board of Directors may receive as a Director
a stated salary or an annual retainer and in addition may be allowed a fixed
fee and his reasonable expenses for attendance at each regular or special
meeting of the Board or any Committee thereof. No full-time salaried officer
of the Corporation shall receive compensation for serving as a Director of
any of the Corporation's wholly-owned subsidiaries. Amended 2/15/90,
effective 2/15/90.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS.
Section 1.-- Executive Committee.
The Board of Directors may, in its discretion, designate annually an
Executive Committee consisting of not less than three Directors as it may from
time
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<PAGE> 10
to time determine. The Committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it, but the Committee shall have no
power or authority to amend the Certificate of Incorporation, adopt an
agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all the Corporation's property and
assets, recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, amend the By-Laws of the Corporation, elect
officers or fill vacancies on the Board of Directors or any Committee of the
Board, declare a dividend, authorize the issuance of stock, or such other
powers as the Board may from time to time eliminate.
At each meeting of the Committee, the presence of a majority of the
members of the Committee, whether regular or alternate, shall be necessary to
constitute a quorum for the transaction of business, and if a quorum is
present, the concurrence of a majority of those present shall be necessary for
the taking of any action.
The Committee shall elect a Chairman to serve for such term as it may
determine, shall fix its own rules of procedure and shall meet at such times
and places and upon such call or notice as shall be provided by such rules.
It shall keep a record of its acts and proceedings, and all actions of the
committee shall be reported to the Board of Directors at the next meeting of
the Board. Amended 1/24/83, effective 2/1/83.
Section 2. -- Alternates.
Alternate members of any committee may be designated by the Board of
Directors from among the Directors to serve as occasion may require. Whenever
a quorum cannot be secured for any Committee meeting from among the regular
members thereof and designated alternates, the member or members of such
Committee present at such meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of such absent or disqualified
member.
Alternate members of a Committee shall receive reimbursement for
expenses and compensation at the same rate as a regular member of such
Committee.
Section 3. -- Other Committees.
The Board of Directors may elect such other Committees, each to consist of
two or more Directors, as it may from time to time determine, and each such
Committee shall serve for such term and shall have and may exercise, during
intervals between meetings of the Board of Directors, such duties, functions
and powers as the Board of Directors may from time to time prescribe.
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<PAGE> 11
ARTICLE V.
OFFICERS.
Section 1.-- Elected Officers.
The officers of the Corporation shall be a Chairman of the Board, a Vice
President and Chief Financial Officer, a Vice President, Law, a Secretary, a
Treasurer, and such other officers as may be elected or appointed by the Board
of Directors. Any number of offices may be held by the same person. Any
officer may hold such additional title descriptions or qualifiers such as
"Chief Executive Officer", "Chief Operating Officer", "Senior Vice President",
"Executive Vice President" or "Assistant Secretary" or such other title as the
Board of Directors shall determine. In addition, at the discretion of the
Board of Directors, a President may be, but need not be, elected. Amended
6/1/83, effective 6/1/83. Amended 2/15/90, effective 2/15/90. Amended 7/17/91,
effective 7/17/91.
Section 2. -- Appointed Officers.
In addition to the elected officers of the Corporation, the Corporation
shall have such other Vice Presidents and officers as may be appointed by the
Chairman of the Board. Any number of offices may be held by the same person.
The exact title held by each appointed officer or Vice President may contain
such modifiers, such as "senior", "executive" or "assistant", and/or titles,
such as "chief executive officer", "chief operating officer", "chief financial
officer", "chief accounting officer" or "comptroller", as the Chairman, in his
discretion, may bestow. In addition, at the discretion of the Chairman, a
President may, but need not be, appointed by the Chairman. Each appointed
officer, unless removed in the manner hereinafter provided, shall hold office
until his successor shall have been duly appointed and qualified, or until he
shall have died, resigned or been removed in the manner hereinafter
provided. Amended 2/15/90, effective 2/15/90. Amended 7/17/91, effective
7/17/91.
Section 3. -- Resignations.
Any officer may resign at any time upon written notice to the Secretary of
the Corporation. Such resignation shall take effect at the date of its
receipt, or at any later date specified therein; and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary to
make it effective.
Section 4. -- Removals.
Any officer elected or appointed by the Board of Directors may be removed,
either with or without cause, by the Board of Directors at a regular or
special meeting of the Board. Any officer or agent appointed by any officer or
committee may be removed, either with or without cause, by such appointing
officer or committee.
Section 5. -- Vacancies.
Any vacancy occurring in any office of the Corporation by reason of
death, retirement, resignation, removal, or otherwise shall be filled for the
unexpired
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portion of the term in the same manner as prescribed in these By-Laws for
regular election or appointment to such office.
Section 6. -- Compensation of Officers.
The compensation of all officers elected by the Board of Directors and of
all other officers whose compensation is prescribed by the Board of Directors
shall be fixed from time to time by the Board of Directors, by any committee
thereof upon whom such power may be conferred by the Board of Directors, or by
the Chairman when so authorized by the Board of Directors. Amended 1/24/83,
effective 2/1/83. Amended 2/15/90, effective 2/15/90.
Section 7. -- Chairman of the Board.
The Chairman of the Board shall have general authority over the property,
business and affairs of the Corporation and over all other officers, agents and
employees of the Corporation, subject to the control and direction of the Board
of Directors including the power to sign and acknowledge in the name and on
behalf of the Corporation, all stock certificates, contracts or other documents
and instruments, except when the signing thereof shall have been expressly
delegated to some other officer or agent, or required by law to be otherwise
signed or executed, and unless otherwise provided by law or by the Board, may
authorize any officer, employee or agent of the Corporation to sign, execute
and acknowledge in his place and stead all such documents and instruments; and
he shall preside at all meetings of the Board and have authority to call
special meetings of the Board or committees of the Board. He shall have power
to appoint Vice Presidents and other officers not elected by the Board of
Directors and shall have such other powers and perform such other duties as may
be assigned to him by the Board of Directors. He shall have power to delegate
to other officers of the Corporation, through written delegations or otherwise,
such authority to transact the business affairs of the Corporation. Adopted
1/24/83, effective 2/1/83. Amended 2/15/90, effective 2/15/90.
Section 8. -- President.
When a President is elected or appointed, he or she shall, during the
absence or disability of the Chairman of the Board, perform the powers and
duties of that office and shall have other duties as may be assigned to him or
her by the Board of Directors or by the Chairman of the Board. Adopted 1/24/83,
effective 2/1/83. Amended 2/15/90, effective 2/15/90. Amended 7/17/91,
effective 7/17/91.
Section 9.-- Vice President, Law.
The Vice President, Law shall be the chief legal advisor of the Corporation
and shall have charge of the management and direction of the legal affairs and
litigation of the Corporation. In addition, such officer shall be responsible
for all government relations and legislative activities of the Corporation.
Amended 6/1/83, effective 6/1/83. Amended 2/15/90, effective 2/15/90. Amended
7/17/91, effective 7/17/19.
Section 10.-- Secretary.
The Secretary shall attend and keep minutes of meetings of the
stockholders and Directors, and of all committees of the Board of Directors, in
books of the
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Corporation provided for that purpose; shall have custody of the corporate
records of the Corporation; shall see that notices are given and records and
reports properly kept and filed by the Corporation, as required by the By-Laws
or as required by law; shall be the custodian of the corporate seal of the
Corporation and see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and in general, shall have such
other powers and perform such other duties as are incident to the office of
Secretary and as may from time to time be assigned to him by the Board of
Directors, the Chairman of the Board or the President.
Section 11. -- Treasurer.
The Treasurer shall have responsibility for the custody and safekeeping of
all funds of the Corporation and shall have charge of their collection,
receipt and disbursement; shall receive and have authority to sign receipts
for all monies paid to the Corporation and shall deposit the same in the name
and to the credit of the Corporation in such banks or depositories as the
Board of Directors shall approve; shall endorse for collection on behalf of
the Corporation all checks, drafts, notes and other obligations payable to the
Corporation; shall disburse the funds of the Corporation only in such manner
as provided in the By-Laws or as the Board of Directors may require; shall
sign or countersign all notes, endorsements, guarantees and acceptances made
on behalf of the Corporation when and as directed by the Board of Directors;
shall keep full and accurate accounts of the transactions in his office in
books belonging to the Corporation and render to the Board of Directors
whenever it may require an account of his transactions as Treasurer; shall
give bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors may require; shall have the
responsibility for the custody and safekeeping of all securities of the
Corporation; and in general, shall have such other power and perform such
other duties as are incident to the office of Treasurer and as from time to
time may be prescribed by the Board of Directors, or be delegated to him by
the Chairman of the Board or by the President or by their designees. Amended
2/15/90, Effective 2/15/90.
Section 12. -- Absence or Disability of Officers.
In the absence or disability of the Chairman of the Board or the
President, the Board of Directors may designate, by resolution, individuals to
perform the duties of those absent or disabled. The Board of Directors may
also delegate this power to a committee or to a senior corporate officer.
Amended 1/24/83, Effective 2/1/83.
ARTICLE VI.
STOCK CERTIFICATES AND TRANSFER THEREOF.
Section 1.-- Stock Certificates.
Every holder of stock in the Corporation shall be entitled to have a
certificate, signed by or in the name of the Corporation by the Chairman of
the Board, the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares, and the class and series
thereof, owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In
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case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 2. -- Designation of Preferences.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, except that in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
a statement that the Corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and rights.
Section 3. -- Transfer of Stock.
Transfer of shares of the capital stock of the Corporation shall be made
only on the books of the Corporation by the holder thereof, or by his attorney
thereunto duly authorized, and on surrender of the certificate or certificates
for such shares. A person in whose name shares of stock stand on the books of
the Corporation shall be deemed the owner thereof as regards the Corporation,
and the Corporation shall not, except as expressly required by statute, be
bound to recognize any equitable or other claim to, or interest in, such shares
on the part of any other person whether or not it shall have express or other
notice thereof.
Section 4. -- Transfer Agent and Registrar.
The Corporation may, if and whenever the Board of Directors shall so
determine, maintain in such place or places as the Board shall so determine,
one or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board where the shares of the Capital stock of the
Corporation of any class or classes shall be transferable, and also one or
more registry offices, each in charge of a registrar designated by the Board
of Directors, where such shares of stock of any class or classes shall be
registered. Amended 1/24/83, effective 2/1/83.
Section 5. -- Additional Regulations.
The Board of Directors may make such additional rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Corporation.
Section 6. -- Lost, Destroyed or Mutilated Certificates.
The holder of any stock of the Corporation shall immediately notify the
Corporation of any loss, theft, destruction or mutilation of the certificate
therefor, and the Board of Directors may, in its discretion, cause a new
certificate to be issued to him in case of mutilation of the certificate upon
surrender of the mutilated
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certificate, or in case of loss, theft or destruction of the certificate upon
satisfactory proof of such loss or destruction, and in any case, if the Board
of Directors shall so determine, upon the delivery of a bond in such form and
sum, and with such surety or sureties, as the Board of Directors may direct,
to indemnify the Corporation and its agent against any claim that may be made
against it or them on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 7. -- Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
Except as otherwise provided by statute or the Restated Certificate of
Incorporation, the Board of Directors may declare dividends upon the shares of
its capital stock either (1) out of its surplus, or (2) in case there shall be
no such surplus, out of its net profits for the fiscal year in which the
dividend is declared or its preceding fiscal year, whenever, and in such
amounts as, in its opinion, the condition of the affairs of the Corporation
shall render it advisable. Dividends may be paid in cash, in property, or in
shares of the capital stock of the Corporation. The Board of Directors may
use and apply any of such surplus or net profits in purchasing or acquiring
any of the bonds, debentures, notes, scrip, other securities or evidences of
indebtedness of the Corporation or of any of its controlled or subsidiary
corporations, or may set apart from any of the funds of the Corporation
available for dividends such sum or sums as it, in its absolute discretion,
may think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for the purpose of maintaining or increasing the
property or business of the Corporation, or for any other purpose it may think
conducive to the best interests of the Corporation. The Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE VIII.
SEAL.
The Board of Directors shall adopt a suitable corporate seal which shall
be in the form imprinted hereon. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner
reproduced.
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ARTICLE IX.
FISCAL YEAR.
The fiscal year of the Corporation shall begin on the first day of January
of each year.
ARTICLE X.
NOTICES.
Notices to stockholders and Directors shall be given in the manner and form
hereinbefore provided, and (a) if given by mail shall be deemed to be given at
the time deposited in the United States mail, enclosed in a sealed envelope
properly addressed and postage prepaid, and (b) if given by telegraph, cable or
wireless shall be deemed to be given at the time delivered to a representative
of a telegraph, cable or wireless company, as the case may be, properly
addressed, with instructions that it be transmitted.
Whenever any notice is required to be given under the provisions of the
statute, the Restated Certificate of Incorporation or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice.
ARTICLE XI.
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1.-- Checks, Drafts, Etc.; Loans.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation and in such
manner as shall, from time to time, be determined by resolution of the Board of
Directors. No loans shall be contracted on behalf of the Corporation unless
authorized by the Board of Directors.
Section 2. -- Deposits.
All funds of the Corporation shall be deposited, from time to time, to the
credit of the Corporation in such banks, trust companies or other depositories
as the Board of Directors may select, or as may be selected by any officer or
officers, agent or agents of the Corporation to whom such power may, from time
to time, be delegated by the Board of Directors; and for the purpose of such
deposit, the Chairman, the President, any Vice President, the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary, or any other
officer or agent to whom such power may be delegated by the Board of Directors,
may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation. Amended
7/17/91, effective 7/17/91.
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ARTICLE XII.
AMENDMENTS.
These By-Laws may be altered or repealed and new By-Laws may be made by
the affirmative vote, at any meeting of the Board, of a majority of the whole
Board of Directors, subject to the right of the stockholders of the
Corporation to amend or repeal By-Laws made or amended by the Board of
Directors by the affirmative vote of the holders of record of a majority in
number of shares of the outstanding stock of the Corporation present or
represented at any meeting of the stockholders and entitled to vote thereon,
provided that notice of the proposed action be included in the notice of such
meeting.
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