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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1994
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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BURLINGTON NORTHERN INC.
(Exact name of issuer as specified in its charter)
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DELAWARE 41-1400580
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
(Address of principal executive offices, including zip code)
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BURLINGTON NORTHERN 401(k) PLAN
FOR TCU EMPLOYEES
(Full title of the Plan)
Edmund W. Burke,
Executive Vice President, Law and Secretary
Burlington Northern Inc.
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
Telephone: (817) 333-2000
(Name, address, and telephone number of agent for service)
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Approximate date of proposed commencement of sales pursuant to the Plan:
From time to time after the Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities to be Price Per Offering Registration
to be Registered Registered Share Price Fee
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Common Stock.......... 1,000,000 $48.75(2) $25,000,000(2) $8,621
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(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
Registration Statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
(2) Estimated solely for the purpose of calculation of the registration fee
pursuant to Rule 457(h) based on the average of the high and low prices of
the Registrant's Common Stock on the consolidated reporting system on
November 16, 1994.
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PROSPECTUS
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BURLINGTON NORTHERN INC.
Burlington Northern 401(k) Plan for TCU Employees
Common Stock
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This Prospectus covers $25,000,000 of interests in the Burlington Northern
401(k) Plan for TCU Employees and 512,820 shares of Common Stock of Burlington
Northern Inc. offered pursuant to the Plan. The terms and conditions of the
offer and sale of the Common Stock, including the prices of the shares, are
governed by the provisions of the Plan.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is November 21, 1994.
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AVAILABLE INFORMATION
A Registration Statement with respect to the Burlington Northern 401(k)
Plan for TCU Employees and the Common Stock of Burlington Northern Inc. (the
"Company") has been filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"). For further information with respect to such Plan and the Common Stock of
Burlington Northern Inc., reference is made to such Registration Statement,
including exhibits thereto and financial statements included or incorporated by
reference therein.
In addition, Burlington Northern Inc. is subject to the informational
requirements of the Securities Exchange Act of 1934 and, therefore, files
reports, proxy statements, and other information with the Commission. Such
reports, proxy statements, and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the following Regional
Offices of the Commission: New York Regional Office, World Trade Center,
Thirteenth Floor, New York, New York 10048, and Chicago Regional Office, 500
West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies may be
obtained (at prescribed rates) from the Commission, Public Reference Section,
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy
statements and other information concerning Burlington Northern Inc. can also be
inspected at the offices of: the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York; the Chicago Stock Exchange, 120 S. LaSalle Street, Chicago,
Illinois; and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California.
Any person to whom a Prospectus has been delivered may, upon written or
oral request to Burlington Northern Inc., receive copies of such documents
without charge. Please direct all requests for such documents to Beverly A.
Edwards-Adams, Assistant Vice President--Corporate Secretary, Burlington
Northern Inc., 3800 Continental Plaza, 777 Main Street, Fort Worth, Texas 76102
(telephone: (817)333-7951).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Commission. The Plan will also file reports with the Commission pursuant to
certain provisions of the Exchange Act. The following documents filed with the
Commission by the Company are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 1, 1993, as amended by Form 10-K/A dated October 5, 1994;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1994, June 30, 1994, and September 30, 1994 (including
Amendment No. 1 on Form 10-Q/A for the quarters ended March 31, 1994, and
June 30, 1994, each dated October 5, 1994, respectively;
(3) The description of the Company's Common Stock contained in its
S-14 Registration Statement No. 2-71519, effective April 19, 1981.
In addition to the foregoing documents, all documents subsequently filed by
the Company or by the Plan pursuant to Sections 13(a), 13(c), 14, and 15(d) of
the Exchange Act, prior to the filing of a post-effective amendment to the
Registration Statement of which this Prospectus is a part which indicates that
all securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the respective date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement
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modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus.
INTRODUCTION
This Prospectus relates to the Burlington Northern 401(k) Plan for TCU
Employees (the "Plan") and to shares of the Common Stock, without par value per
share ("Common Stock") of Burlington Northern Inc. (the "Company"), which are to
be offered pursuant to the Plan. The Plan was adopted by the Company, to become
effective commencing January 2, 1986. The information contained herein reflects
changes in the Plan which will go into effect on January 1, 1995.
The Company was incorporated in Delaware in 1981. Its principal executive
offices are located at 3800 Continental Plaza, 777 Main Street, Fort Worth,
Texas 76102, and its telephone number is (817) 333-2000. Its principal business
is rail transportation.
The terms and conditions of the Plan are set forth in the Burlington
Northern 401(k) Plan for TCU Employees and a Trust Agreement (the "Trust
Agreement") to be entered into between the Company and T. Rowe Price Trust
Company, a Maryland limited trust company (the "Trustee"). The Plan is filed as
an exhibit to this Registration Statement and is available upon request at the
offices of the Burlington Northern Inc. The information in this Prospectus with
respect to the provisions of the Plan is a summary only and is subject to and
qualified by reference to this document.
The $25,000,000 of interests of participation in the Plan being registered
pursuant to the Registration Statement that includes this Prospectus represent
the total amount that may be contributed to the Plan by Participants from the
date hereof without registering additional interests of participation with the
Commission under a new registration statement. Also, the Registration Statement
that includes this Prospectus registers 512,820 shares of the Company's Common
Stock.
PURPOSES OF THE PLAN
The purposes of the Plan are to provide a means for employees to adopt a
regular savings program and to provide a supplement to their retirement income.
ELIGIBILITY OF EMPLOYEES
The Plan was established on January 2, 1986, restated effective January 1,
1989, and is being changed as reflected herein effective January 1, 1995. Each
Qualified Employee of a Participating Employer shall become a Participant in the
Plan on the earliest first day of any month on or after the date the Plan
becomes effective with respect to his Participating Employer and the TCU, and on
which he has completed a 60-day period of service as a Qualified Employee.
A "Qualified Employee" means any individual who is employed by a
Participating Employer, and whose wages and working conditions are covered by a
collective bargaining agreement between the Company or Participating Employer
and TCU, or any extension or renewal thereof, during any part of a payroll
period. Qualified Employee shall not include, however, any employee who is a
Leased Employee. Burlington Northern Railroad Company, Western Fruit Express,
and Camas Prairie Railroad Company have adopted the Plan and are "Participating
Employers."
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ELECTIVE CONTRIBUTIONS
1. Before Tax Deposits. A Participant may elect to contribute, as
"Before Tax Deposits," a percentage of compensation. A Participant may
contribute from 1% to 25%, in whole percentage amounts, of the Participant's
compensation, which includes salary and wages. The amount of Before Tax Deposits
is also subject to certain other limitations (see "Limitations and
Restrictions"). The Participating Employer will contribute the Before Tax
Deposits to the Funding Agency in lieu of the current cash payment to the
Participant of the elected percentage of compensation. The election for Before
Tax Deposits is made by completing an election form and submitting it in
accordance with rules established by the Review Committee. For a discussion of
the federal income tax treatment of Before Tax Deposits, see "Federal Income Tax
Consequences to Participants" elsewhere herein.
2. Sick Leave Deposits. A Participant may elect to make Sick Leave
Deposits to the Plan in lieu of his sick leave buy-back days as contained in
Rule 55G of the May 6, 1980, BN-BRAC Agreement, as amended by Item 14 of Letter
of Understanding dated November 21, 1985. Each Participant may elect to have his
Participating Employer make deposits up to the maximum amount available for him
as specified by said Rule 55G, as amended. Any such deposits shall be made by
the Participating Employer at the time specified in Rule 55G and shall be
credited to the Participant's Account as provided in Article V.
LIMITATIONS AND RESTRICTIONS
1. Annual Limitation on Basic Contributions. A Participant may elect
Before Tax Deposits and Sick Leave Deposits that do not exceed an annual
limitation ($9,240 in 1994) imposed by Section 402(g) of the Code. However, once
the limit is exceeded, see "Federal Income Tax Consequences to Participants" for
an explanation of the tax treatment of Before Tax Deposits which exceed the
annual limitations.
2. Restrictions on Highly Compensated Employees. Sections 401(k) and
401(m) of the Code place restrictions on the amount of Before Tax Deposits which
can be made by or on behalf of Participants who are highly compensated
employees. The contributions for highly compensated employees, expressed as a
percent of their compensation, may not exceed certain limits when compared to
the contributions for employees who are not highly compensated, expressed as a
percent of their compensation. The Review Committee will test the contributions
under the Plan to determine whether they comply with these restrictions, and, if
the limits are exceeded, the Review Committee may reduce the amount of the
contributions made by or on behalf of a highly compensated Participant. The
Review Committee may also direct that the excess contributions, plus earnings or
losses, be distributed to the highly compensated Participant before the end of
the year following the year in which the excess contributions were made.
3. Section 415 Limitations. Section 415 of the Code limits a
Participant's "Annual Additions" for any year to the lesser of $30,000 (or such
larger amount as may be determined by the Secretary of the Treasury) or 25% of
the Participant's Compensation. Annual Additions under the Plan include all
employer contributions for each Participant, and forfeitures allocated to the
Participant, if any. Annual Additions also include contributions and forfeitures
allocated to the Participant under other defined contribution plans maintained
by a Participant's employer or by an affiliate of the employer. In addition,
Section 415 imposes limitations on the combination of benefits (such as pension
benefits) under certain defined benefit plans and Annual Additions under defined
contribution plans. As a result, a Participant's pension benefits (if he or she
participates in a defined benefit plan of the employer or an affiliate) may be
reduced if, combined with his or her Annual Additions, the Section 415
limitations are exceeded.
To avoid exceeding the limitations on Annual Additions, a Participant's
contributions will be reduced to the extent necessary.
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TOP-HEAVY PROVISIONS
In accordance with Section 416 of the Code, the Plan requires an employer
to make certain additional employer contributions on behalf of non-key employees
if such plan, or the aggregate of certain other plans of the Company or its
affiliates, is deemed "top-heavy." In general, the Plan will be deemed top-heavy
if the aggregate values of the accounts of key employees exceed 60% of the
aggregate value of the accounts of all employees. The top-heavy provisions in
the Plan may also affect the calculation of the limitations on contributions
and/or benefits under Section 415 of the Code, as discussed above.
INVESTMENTS
All contributions under the Plan will be placed in a Trust (the "Trust"),
effective January 1, 1995, that will be maintained in accordance with the Trust
Agreement. Each Participant may elect to have the amount of the Participant's
account invested in increments of any whole percentage of the total in one or
more of the investment funds described below. The investment funds under the
Plan, effective January 1, 1995, will be:
(a) Company Stock Fund--invested in the Common Stock of the Company.
The Trustee will retain the Common Stock in the Company Stock Fund
regardless of market fluctuations. Fractional shares of Company Common
Stock will be held in an "over and under account" for the benefit of
Participants (see "Administration").
(b) A "Balance Fund," which shall be invested in a mix of U.S. and
non-U.S. bonds, a mix of U.S. and non-U.S. equities, and money market
instruments, as described herein, as the Trustee, acting in accordance with
the provisions of the Trust Agreement and instructions from the Review
Committee or an investment manager designated by the Review Committee,
deems advisable.
(c) An "Income Fund," which shall be invested in any combination of
investment contracts and money market instruments as described herein, as
the Trustee, acting in accordance with the provisions of the Trust
Agreement and instructions from the Review Committee or an investment
manager designated by the Review Committee, deems advisable.
(d) A "Short-Term Bond Fund" which shall be invested in a mixture of
U.S. Government, corporate, and mortgage securities, including derivative
securities, as described herein, as the Trustee, acting in accordance with
the provisions of the Trust Agreement and the instructions of the Review
Committee or an investment manager designated by the Review Committee,
deems advisable.
(e) A "U.S. Equity Index Fund," which shall be invested in equities
whose aggregate composition will replicate the performance of its namesake
index as described herein, as the Trustee, acting in accordance with the
provisions of the Trust Agreement and instructions from the Review
Committee or an investment manager designated by the Review Committee,
deems advisable.
In order to accomplish the purposes of the Balanced Fund, the Income Fund,
the Short-Term Bond Fund, and the U.S. Equity Index Fund, the Review Committee
has directed the Trustee to utilize the four investment funds, managed by
affiliates of T. Rowe Price Associates Inc., ("T. Rowe Price") and described
below, to invest the Before Tax Deposits and Sick Leave Deposits of Participants
in each of such funds in such amounts as such Participants shall direct.
The "Balance Fund" shall be the T. Rowe Price Balanced Fund, Inc., a mutual
fund managed by T. Rowe Price.
The Fund's investment objectives are to seek capital appreciation, current
income, and preservation of capital by investing in a diversified portfolio of
common stocks and bonds. Common stocks are generally expected
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to represent approximately 60% of total assets, and fixed income securities,
including cash reserves, will represent the remaining assets.
The Fund's share price will fluctuate with changing market conditions, and
the investment may be worth more or less when redeemed than when purchased. The
Fund should not be relied upon for short-term financial needs nor used to play
short-term swings in the stock market.
The Fund is designed for investors seeking to balance the potential
appreciation of common stocks with the income and principal stability of bonds
over the long term. The Fund's investment in common stocks is intended to
provide sufficient capital growth to offset the erosive effects of inflation.
The balanced approach to achieving a combination of growth, income, and
stability is a strategy used by many large pension funds because of its
conservative, long-term focus. For an IRA, retirement plan, or other long-term
investment, the Fund offers a well-balanced investment program which seeks to
combine attractive returns with the benefits of broad diversification.
To achieve its investment objectives, the Fund will normally invest
approximately 60% of its total assets in common stocks and the remainder in
bonds and fixed income securities. While this portfolio mix may vary, depending
on T. Rowe Price's long-term assessment of market conditions, the Fund will
maintain at least 25% of its total assets in senior fixed-income securities, and
the Fund will not attempt to time short-term moves in the market. This
conservative approach is designed to cushion the investment from the volatility
normally associated with mutual funds dedicated primarily to common stocks.
The Fund's common stock investments will be concentrated primarily in
larger, established companies, but will also include small and medium-sized
companies which are believed to exhibit good prospects for growth. Bond and
fixed income investments will include U.S. Treasury and agency securities,
investment-grade (rated BBB or better) corporate securities, mortgage-backed
securities, and other types of fixed income investments. The average maturity of
the Fund's fixed income investments will vary with economic conditions.
Participants will receive a prospectus from T. Rowe Price which contains
substantially more information, including information on risks and fees and
expenses, which they should carefully consider in making their investment
decisions.
The "Income Fund" shall be the T. Rowe Price Stable Value Common Trust
Fund, a common trust fund established by T. Rowe Price Trust Company. The Fund
invests primarily in GICs, BICs, SICs, and money market securities. A GIC is a
contract under which the purchaser agrees to deposit a sum of money with an
insurance company (either in a lump sum or in installments). In return, the
insurance company promises to pay a stated rate of interest for the contractual
term, repay the principal upon maturity, and allow for withdrawals for certain
Participant-initiated events. Similar instruments, when issued by banks, are
referred to as "BICs." Under applicable state regulations, insurance companies
are authorized to issue various types of GICs and account for these contracts as
underwritten insurance policies rather than as corporate debt obligations. The
purchase price paid for a GIC or BIC becomes part of the general assets of the
issuer (or sometimes part of a separate account) and repayment is backed by the
general assets of the issuer.
An SIC is a structured investment contract. These instruments are issued by
banks, insurance companies, and other issuers and provide promises by the issuer
to make book value payments upon certain events. SICs are supported by
underlying securities which may be held in a separate account of the insurer or,
in the case of bank products, generally held in the name of the Fund in a
custody account. SICs are generally structured to provide the purchaser with
ownership of, or a security interest in, the underlying securities, and the
purchaser takes the credit risk of these underlying securities.
The Fund will only purchase GICs, BICs, and SICs from issuers, and in the
case of SICs, will only purchase underlying securities which meet quality and
credit standards established by the Trustee.
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Participants will receive a prospectus from T. Rowe Price which contains
substantially more information, including information on risks and fees and
expenses, which they should carefully consider in making their investment
decisions.
The "Short Term Bond Fund" shall be the T. Rowe Price Short Term Bond Fund,
a mutual fund managed by T. Rowe Price. The Fund's objective is a high level of
income consistent with minimum fluctuation in principal value and liquidity.
The Fund will invest in a diversified portfolio of short-and intermediate-term
corporate, government, and mortgage securities. The Fund may also invest in
other types of securities such as bank obligations, collateralized mortgage
obligations (CMOs), foreign securities, hybrids, and futures and options. Under
normal circumstances, at least 65% of total assets will be invested in
short-term bonds. The Fund's dollar-weighted average effective maturity will
not exceed three years, and the Fund will not purchase any security whose
effective maturity, average life, or tender date measured from the date of
settlement, exceeds seven years.
Securities purchased by the Fund will be rated within the four highest
credit categories by at least one established public rating agency (or, if
unrated, a T. Rowe Price equivalent). An investment-grade security can range
from the highest rated (AAA) to a medium quality (BBB). Securities in the BBB
category may be more susceptible to adverse economic conditions or changing
circumstances and the securities at the lower end of the BBB category have
certain speculative characteristics. The Fund may retain a security that is
downgraded to a non-investment grade level after purchase.
The fund may invest in derivative securities. In the broadest sense, a
derivative is any security whose value is derived from underlying securities or
a market benchmark. The amount of risk represented by derivatives varies widely
from one to another, and may not be accurately depicted by the instrument's
credit quality rating. The quality rating assesses the issuer's ability to make
all required interest and principal payments. However, the particular structure
of the derivative may determine whether or not the investor (such as the Fund)
actually receives the interest and/or principal payments. The Fund can invest
in derivatives to hedge against risks as well as to enhance returns. Some of
the potentially more volatile derivatives the Fund may purchase include futures
and stripped securities.
Types of Portfolio Securities. In seeking to meet its investment
objective, the Fund may invest in any type of security or instrument (including
certain potentially high risk derivatives) whose yield, credit quality, and
maturity characteristics are consistent with the Fund's investment program.
These and some of the other investment techniques the Fund may use are described
in the following pages.
Fundamental policy: The Fund will not purchase a security if, as a result,
with respect to 75% of its total assets, more than 5% of its total assets would
be invested in securities of the issuer or more than 10% of the outstanding
voting securities of the issuer would be held by the Fund, provided that these
limitations do not apply to the Fund's purchases of securities issued or
guaranteed by the U.S. Government, its agencies, or instrumentalities.
Foreign Securities. The Fund may invest in foreign securities, including
nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers. Such investments involve some
special risks, such as exposure to potentially adverse political and economic
developments; nationalization and exchange controls; potentially lower liquidity
and higher volatility; possible problems arising from accounting, disclosure,
settlement, and regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will decrease the investments
value (favorable changes can increase its value).
The Fund may invest without limitations, in U.S. dollar-denominated debt
securities issued by foreign issuers, foreign branches of U.S. banks, and U.S.
branches of foreign banks. The Fund may also invest up to 10% of its total
assets in non-U.S. dollar-denominated fixed income securities principally traded
in financial markets outside the United States.
Asset-backed Securities. An underlying pool of assets, such as credit card
or automobile trade receivables or corporate loans or bonds, backs these bonds
and provides the interest and principal payments to investors.
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Credit quality depends primarily on the quality of the underlying assets and the
level of credit support, if any, provided by the issuer. The underlying assets
(i.e., loans) are subject to prepayments which can shorten the securities'
weighted average life and may lower their return. The value of these securities
also may change because of actual or perceived changes in the creditworthiness
of the originator, serving agent, or of the financial institution providing the
credit support. There is no limit on the Fund's investment in these securities.
Mortgage-backed Securities. The Fund may invest in a variety of
mortgage-backed securities. Mortgage lenders pool individual home mortgages with
similar characteristics to back a certificate or bond, which is sold to
investors such as the Fund. Interest and principal payments generated by the
underlying mortgages are passed through to the investors. The "big three"
issuers are Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage
Corporate (Freddie Mac). GNMA certificates are backed by the full faith and
credit of the U.S. Government, while others, such as Fannie Mae and Freddie Mac
certificates, are only supported by the ability to borrow from the U.S. Treasury
or supported only by the credit of the agency. Private Mortgage bankers and
other institutions also issue mortgage-backed securities. There is no limit on
the Fund's investment in mortgage-backed securities.
Mortgage securities are subject to scheduled and unscheduled principal
payments as homeowners pay down or prepay their mortgages. As these payments are
received, they must be reinvested when interest rates may be higher or lower
than on the original mortgage security. Therefore, mortgage securities are not
an effective means of locking in long-term interest rates. In addition, when
interest rates fall, the pace of mortgage prepayments picks up. These refinanced
mortgages are paid off at face value (par), causing a loss for any investor who
may have purchased the security at a price above par. In such an environment,
this risk limits the potential price appreciation of these securities and can
negatively affect the Fund's net asset value. When rates rise, however,
mortgage-backed securities have historically experienced smaller price declines
than comparable quality bonds.
Additional mortgage-backed securities in which the Fund may invest include:
(a) Collateralized Mortgage Obligations (CMO's). CMO's are debt
securities that are fully collateralized by a portfolio of mortgages or
mortgage-backed securities. All interest and principal payments from the
underlying mortgages are passed through to the CMOs in such a way as to
create, in most cases, more definite maturities than is the case with the
underlying mortgages. CMOs may pay fixed or variable rates of interest, and
certain CMOs have priority over others with respect to the receipt of
prepayments.
(b) Stripped Mortgage Securities. Stripped mortgage securities (a
potentially high risk type of derivative) are created by separating the
interest and principal payments generated by a pool of mortgage-backed
securities or a CMO to create additional classes of securities. Generally,
one class receives only interest payments (IOs), and one, principal
payments (POs). Unlike other mortgage-backed securities and POs, the value
of IOs tends to move in the same direction as interest rates. The Fund
could use IOs as a hedge against falling prepaying rates (interest rates
are rising) and/or a bear market environment. POs can be used as a hedge
against rising prepayment rates (interest rates are falling) and/or a bull
market environment. IOs and POs are acutely sensitive to interest rate
changes and to the rate of principal prepayments. A rapid or unexpected
increase in prepayments can severely depress the price of IOs, while a
rapid or unexpected decrease in prepayments could have the same effect on
POS. These securities are very volatile in price and may have lower
liquidity than most other mortgage-backed securities. Certain non-stripped
CMOs may also exhibit these qualities, especially those which pay variable
rates of interest which adjust inversely with and more rapidly than sort-
term interest rates. There is no guarantee the Fund's investment in CMOs,
IOs, or POs will be successful, and the fund's total return could be
adversely affected as a result.
Operating Policy: The Fund may invest up to 10% of its total assets in
stripped mortgage securities.
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Hybrid Instruments. These instruments (a type of derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount or interest rate of a hybrid could be tied (positively or
negatively) to the price of some commodity, currency, or securities index other
than interest rate (each a "benchmark"). Hybrids can be used as an efficient
means of pursuing a variety of investment goals, including currency hedging,
duration management, and increased total return. Hybrids may not bear interest
or pay dividends. The value of a hybrid or its interest rate may be a multiple
of a benchmark and, as a result, may be leveraged and move (up or down) more
steeply and rapidly than the benchmark. These benchmarks may be sensitive to
economic and political events, such as commodity shortages and currency
devaluations, which cannot be readily foreseen by the purchaser of a hybrid.
Under certain conditions, the redemption value of a hybrid could be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the redemption
value of a hybrid could be zero. Hybrids can have volatile prices and limited
liquidity. Thus, an investment in a hybrid may entail significant market risks
that are not associated with a similar investment in a traditional, U.S.
dollar-denominated bond that has a fixed principal amount and pays a fixed rate
or floating rate of interest. The purchase of hybrids also exposes the Fund to
the credit risk of the issuer of the hybrid. These risks may cause significant
fluctuations in the net asset value of the fund.
The Fund may invest up to 10% of its total assets in hybrid instruments.
There is no assurance that the Fund's investment in hybrids will be successful.
Private Placements (Restricted Securities). These securities are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered with the SEC. Although certain of
these securities may be readily sold, for example under Rule 144A, others may be
illiquid and their sale may involve substantial delays and additional costs.
The Fund will not invest more than 15% of its net assets in illiquid securities.
Banking Industry. The Fund may, under certain conditions, invest a
substantial amount of its assets in the banking industry. Investments in the
banking industry may be affected by general economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers. In addition, the profitability of the banking industry is largely
dependent upon the availability and cost of funds for the purpose of financing
lending operations under prevailing money market conditions. T. Rowe Price
believes that any risk to the Fund which might result from concentrating in the
banking industry will be minimized by diversification of the Fund's investments
and T. Rowe Price's credit research.
The Fund will, as a matter of fundamental policy, normally concentrate 25%
or more of its assets in the securities of the banking industry when the Fund's
position in issues maturing in one year or less equals 35% or more of the Fund's
total assets.
Utility Industry Concentration. The Fund may, under certain conditions,
invest a substantial amount of its assets in the utility industry. Investments
in any of these industries may be affected by environmental conditions, energy
conservation programs, fuel shortages, availability of capital to finance
operations and construction programs, and federal and state legislative and
regulatory actions. T. Rowe Price believes that any risk to the Fund which
might result from concentrating in any such industry will be minimized by
diversification of the Fund's investment.
As a matter of fundamental policy, the Fund will, under certain conditions,
invest up to 50% of its assets in any one of the following industries: gas
utility, gas transmission utility, electric utility, telephone utility, and
petroleum.
Participants will receive a prospectus from T. Rowe Price which contains
substantially more information, including information on risks and fees and
expenses, which they should carefully consider in making their investment
decisions.
The "U.S. Equity Index Fund" shall be the T. Rowe Price Equity Index Trust
Fund, a common trust fund established by the T. Rowe Price Trust Company as part
of the T. Rowe Price Institutional Common Trust Fund. The investment objective
of the T. Rowe Price Equity Index Trust Fund ("Equity Index Trust") is to
replicate the
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<PAGE>
total return performance of the United States equity market for publicly-traded
securities as represented by the Standard & Poor's composite stock index ("S&P
Index"). Equity Index Trust Fund will seek to replicate the performance of the
S&P Index by investing substantially all of its assets in stocks included in the
S&P Index, and to the extent practical, in all 500 stocks. To the extent
practical, Equity Index Trust Fund will invest in the stocks comprising the S&P
Index in proportion to their weighting in the S&P Index. In addition to
investments in common stocks, Equity Index Trust Fund may invest in any type of
security including, but not limited to, convertible securities, preferred
stocks, warrants, restricted securities, investment companies, investment
trusts, options, futures, and options on futures including stock index futures
contracts and stock index options. Equity Index Trust Fund may establish and
maintain reserves to meet liquidity needs or for other purposes. Equity Index
Trust Fund's reserves may be invested in domestic, as well as foreign, money
market instruments, including, but not limited to, U.S. government obligations,
certificates of deposits, bankers acceptances, commercial paper, short-term
corporate debt securities and repurchase agreements, collective trust funds and
other pooled vehicles maintained by banks; interests in or shares of pooled
vehicles, regulated investment companies or other investment companies,
including investment companies and pooled vehicles for which the Trustee, or an
affiliate of the Trustee, may act as sponsor, trustee, or investment adviser
(whether or not incorporated and whether or not registered under the Investment
Company Act of 1940).
Additional funds may be established from time to time by the Review
Committee. If a Participant does not make appropriate election with regard to
all or a portion of the Participant's account, that portion will be invested in
the Income Fund. Participants who have chosen to invest in the Company Stock
Fund may instruct the Trustee regarding the voting of the Company's Common Stock
allocated to the Participant's account.
A Participant may change his or her investment elections in increments of
any whole percentage of the total of the Participant's account on any day.
Participants will receive a prospectus from T. Rowe Price which contains
substantially more information, including information on risks and fees and
expenses, which they should carefully consider in making their investment
decisions.
COMMON STOCKS ARE SUBJECT TO MARKET RISKS AND WILL FLUCTUATE IN VALUE.
PARTICIPANTS SHOULD UNDERSTAND THAT THERE CAN BE NO ASSURANCE THAT THE
COMMITTEE'S AIMS AND OBJECTIVES FOR FUNDS CONTAINING SUCH STOCKS WILL BE
ACHIEVED. FUNDS INVESTED IN THE COMPANY'S COMMON STOCK ARE PARTICULARLY SUBJECT
TO RISK BECAUSE SUCH FUNDS ARE NOT DIVERSIFIED.
ACCOUNTS AND ALLOCATIONS
1. Accounts. Each Participant may have an account under the Plan
consisting of Before Tax Deposits and Sick Leave Deposits made by or on behalf
of the Participant, plus earnings or losses thereon. The account of a
Participant is assigned a share of each investment fund in which the Participant
has chosen to invest. Each account's share of each investment fund is
determined by the ratio which the balance of each such account bears to the
total of the Participants' account.
2. Allocations. Before Tax Deposits and Sick Leave Deposits are
transferred to the Trust no later than 30 days after the end of each month in
which the amounts would have been paid to the Participant if the Participant had
not elected the contributions. Before Tax Deposits and Sick Leave Deposits are
allocated to the appropriate Participant accounts as of the last day of the
month for which they are made.
VALUATIONS
At least once each quarter, the value of all of a Participant's account
must be determined. However, the Trustee intends to value accounts daily. Each
account of a Participant is adjusted for contributions to the account
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<PAGE>
and for withdrawals and distributions from it since the last valuation date.
The assets of each investment fund are valued at their fair market value by the
Trustee. The net worth of each investment fund is then determined by subtracting
from the fair market value of its assets any expenses, withdrawals,
distributions, and transfers which have been incurred but not yet paid. The
value of each Account of a Participant is determined by allocating to each
account a pro rata share of the net worth of the investment fund or funds in
which such account is invested. Thus, the total value of a Participant's
interest in the Plan will depend on the amount of the Participant's Before Tax
Deposits and Sick Leave Deposits and his or her share of income realized and
unrealized profits and losses, withdrawals, and inter-fund transfers. Reports on
the value of a Participant's account will be made from time to time, but at
least once each quarter.
Performance data on each of the investment funds available to Participants
under the Plan and on the Company's Common Stock is summarized in the tables
below. The tables state the year-end value of a $100 unit invested on January 1,
1989 (or Fund Inception):
<TABLE>
<CAPTION>
COMPANY STABLE EQUITY SHORT-TERM
STOCK BALANCE VALUE INDEX BOND
YEAR FUND(1) FUND FUND TRUST(2) FUND
---- ------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
1989............. N/A 120.65 $108.89 N/A $109.91
1990............. N/A $129.35 $117.94 N/A $119.40
1991............. N/A $159.28 $127.93 N/A $132.79
1992............. N/A $169.94 $135.76 $ 98.90 $139.45
1993............. N/A $192.62 $144.01 $108.79 $148.67
</TABLE>
- ------------------------
(1) Invested primarily in the Common Stock of Burlington Northern Inc.,
commencing January 1, 1995.
(2) Fund Inception 12/21/92
VESTING
A vested interest is an interest that is nonforfeitable in the sense that
it constitutes a claim that is unconditional and legally enforceable. A vested
interest is therefore not subject to forfeiture or divestiture by reason of
subsequent events or conduct by the Participant. Being vested does not mean,
however, that a Participant's account balances are guaranteed against investment
losses or that a Participant has a right to make any withdrawal or receive any
distribution. Withdrawals and distributions under the Plan will be made only in
accordance with the Plan's provisions and are subject to the provisions of the
Code and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Participants will not be considered to have a vested right to amounts
mistakenly allocated to their accounts. A Participant's interest in the
Participant's account under the Plan is fully vested at all times.
DISTRIBUTION
The value of a Participant's account will be distributed to the Participant
(or, in the event of the Participant's death, to certain Beneficiaries) after
the Participant's Termination of Employment, including death, termination, or
retirement. A Termination of Employment occurs upon the termination of
employment with the Company and its affiliates. A Termination of Employment does
not occur if the Participant continues to be employed but becomes ineligible to
participate. Participants who are absent from employment will not be deemed to
have suffered a Termination of Employment but will be deemed an Inactive
Participant. A Participant who is absent from employment due to illness or other
incapacity does not incur a separation from service until the Committee
determines that he or she has incurred a disability under the Plan.
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<PAGE>
A Participant with an account balance of more than $3,500 to whom a
distribution is due may elect to defer the distribution. A deferred distribution
may take the form of a lump-sum distribution payable within a period which ends
on or before April 1 of the year following the calendar year in which the
Participant attains age 70 1/2. If a Participant elects a deferred distribution,
fees for administering the Participant's account will be deducted from such
account.
Distributions to a Participant will be in cash except that the Participant
may elect to receive the portion of his or her account invested in the Company's
Common Stock in whole shares of Common Stock plus cash in lieu of any
fractional share, if the Participant elects a lump-sum distribution of his
account.
In the case of the death of a Participant, distributions will be made to
the Participant's Beneficiary designated by the Participant. If distributions to
a Participant commence prior to the Participant's death, distributions (less any
outstanding loans) to the Beneficiary shall be made in an immediate single lump-
sum payment. If distributions to the Participant do not commence prior to the
Participant's death, the balance of the Participant's account will be
distributed not later than one year after the Participant's death.
HARDSHIP WITHDRAWALS
With certain exceptions described below, a Participant may withdraw all or
part of the Participant's account in the event of an immediate and heavy
financial need occurring in the Participant's personal affairs as determined by
the Review Committee based on all relevant facts and circumstances. In any
event, distributions for the following reasons shall be deemed to arise on an
immediate and heavy financial need:
(1) the payment of medical expenses incurred by the Participant or
the Participant's spouse or dependents which are not reimbursed by medical
insurance;
(2) the purchase, excluding mortgage payments, of the Participant's
principal residence;
(3) the payment of tuition for the next twelve months of
post-secondary education for the Participant or the Participant's spouse,
children, or dependents;
(4) a payment to prevent eviction of the Participant from the
Participant's principal residence or to prevent foreclosure of the mortgage
on the Participant's principal residence;
(5) the payment of funeral expenses paid by the Participant for a
family member;
(6) loss of income due to layoff or disability of the Participant or
spouse;
(7) loss due to uninsured destruction or damage to the Participant's
property; or
(8) payments for other deemed financial needs as published by the
Commissioner of Internal Revenue.
The amount of any distribution for financial hardship is determined by the
Committee and is limited to the amount which is necessary to meet the financial
need and which is not reasonably available from other sources. The Committee
will require the Participant to make specific representations that other sources
are not available to relieve the Participant's financial need.
Earnings on Before Tax Deposits, and similar deferrals under Section 401(k)
of the Code that are transferred to the Plan from another qualified employee
benefit plan, may not be withdrawn by Participants.
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<PAGE>
LOANS
Upon approval of the Committee, Active Participants or Beneficiaries may
apply for and receive loans from their account in the Plan. The Participant
must repay the loan with interest under the terms of the loan. To obtain a
loan, the Participant must have a total account balance of at least $2,000. The
loan amount may be from $1,000 to $50,000 but may not be more than 50% of the
total balance in the Participant's account. The 50% limitation is also reduced
by the highest outstanding balance of loans from the Plan during the prior
one-year period. The Participant may not have more than one loan from the Plan
outstanding at any time.
The Participant must sign a promissory note and authorize payroll
deductions for repayment of the loan and interest in equal semimonthly
installments. The Participant may elect a repayment period of one to five
years. The interest rate will be as determined by the Review Committee. The
Participant may repay the total loan plus accrued interest without penalty but
may not make partial prepayments. When a Participant has a Termination of
Employment, the unpaid balance of the Participant's loan will be deducted from
any distributions to the Participant, if not timely repaid. If the Participant
elects to defer the distributions, the loan must be repaid within 60 days after
the separation from service. If the loan is not repaid, it will automatically
be deducted from the Participant's account balance and will be treated as a
distribution to the Participant. Such a distribution could affect the tax
treatment of the entire distribution. (See "Federal Income Tax Consequences to
Participants" regarding the tax consequences of distributions.)
FEDERAL INCOME TAX CONSEQUENCES TO PARTICIPANTS
The Company has received a favorable determination letter from the Internal
Revenue Service stating that the Plan is qualified under Section 401 of the Code
and that the Trust is exempt from tax under Section 501 of the Code. Continued
qualification will also depend upon the Plan's effect in operation. The Company
will file, when deemed necessary, timely applications with the Internal Revenue
Service for determination that amendments to and restatements of the Plan do not
adversely affect its initial qualifications.
1. Contributions. Under Section 402(e)(3) of the Code, the amount of
Before Tax Deposits and Sick Leave Deposits to the Plan, subject to an annual
limitation described below and on page 5 hereof, should not be included in the
income of the Participant in the year of contribution even though the
Participant would have been entitled to receive that amount in cash in lieu of
making such contributions. Such amount should not be taxed to a Participant or
beneficiary until distribution or withdrawal. No federal income taxes will be
withheld from Before Tax Deposits and Sick Leave Deposits when they are
contributed to the Plan unless the annual limitation is exceeded, but such
contributions will be treated as wages for purposes of railroad retirement
taxes. The Company also intends to treat Sick Leave Deposits in the manner
described in the preceding sentences.
Each Participant's "elective deferrals" which exceed an annual
limitation ($9,240 in 1994) are included in the Participant's income in the year
of deferral. The Secretary of the Treasury may adjust the annual limitation for
increases in the cost of living. Elective deferrals consist of all of a
Participant's before tax contributions under any qualified cash or deferred
arrangements (including the Plan), simplified employee pensions, and salary
reduction agreements to purchase annuity contracts under Section 403(b) of the
Code. The Plan is designed so that the annual limitation will never be exceeded
by Participants who do not participate in more than one qualified cash or
deferred arrangement (or similar arrangement) during a calendar year.
Additional Before Tax Deposits and Sick Leave Deposits, if any, will be
distributed to the Participant in cash. Federal income taxes will be withheld
from such Before Tax Deposits and Sick Leave Deposits and distributed in cash.
If a Participant's Before Tax Deposits and Sick Leave Deposits under the Plan
and elective deferrals under other qualified cash or deferred arrangements (or
similar arrangements) exceed the annual limitation, the excess is included in
the Participant's income. If such excess amounts are not distributed to the
Participant by the first April 15 following the end of the Participant's tax
year in which they were made, the excess amounts will be included in the
Participant's income again when they are actually distributed. If the excess
amounts are distributed by April 15, any income earned on such amounts will be
included in the Participant's income in the year the income is distributed. A
Participant may notify the Committee by March 1 following the end of the
Participant's tax year of
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<PAGE>
any excess amounts and the Committee may, but is not required to, distribute
the excess amounts to the Participant. If the excess is attributable solely to
contributions to Plans of the Company, such excess shall be distributed.
A Participant's employer will generally be permitted to deduct, as
compensation expense, all contributions to the Plan whether or not such
contributions are included in the Participant's income.
2. Distributions.
(a) Distributions (including In-Service Withdrawals).
Distributions (including in-service withdrawals) will be taxed at
ordinary income rates in the year of receipt. Distributions (including
in-service withdrawals) may be subject to additional taxes as
explained in subsection (c) below. An "in-service withdrawal" is a
withdrawal from a Participant's account in the Plan while the
Participant is an employee.
(b) Lump-Sum Distribution Defined. Distributions that are "lump-
sum distributions" may qualify for certain favorable tax treatment as
described in the following paragraphs. A distribution to a Participant
or Beneficiary will qualify as a "lump-sum distribution" under the
Code if the recipient receives the entire balance of the Participant's
accounts from all plans of the Employer of the same type within one
taxable year and the distribution results by reason of the
Participant's death or termination of service or occurs after the
Participant has attained age 59 1/2. If the recipient is the
Participant, the distribution will not qualify as a lump-sum
distribution unless the Participant has actively participated in the
particular plan for five or more taxable years before the taxable year
of distribution.
(c) Taxable Portion of Lump-Sum Distribution. The taxable portion
of a lump-sum distribution is the fair market value of the
distribution plus the outstanding balance of any unpaid loans reduced
by any net unrealized appreciation with respect to the Company's
Common Stock that is distributed, unless the Participant elects not to
exclude the net unrealized appreciation. "Net unrealized appreciation"
is the excess of the market value of the Common Stock at the time of
distribution over the amount paid by the Trust. To the extent a
recipient elects to receive cash in lieu of Common Stock, such stock
will, in effect, be sold, thereby reducing the amount of net
unrealized appreciation. The taxable portion of a lump-sum
distribution is taxed at ordinary income tax rates in the year of
receipt unless the distribution qualifies for capital gains treatment,
special averaging treatment, or rollover treatment. It may also be
subject to additional taxes as explained below.
(d) Capital Gain Treatment. A Participant who attained age 50
before January 1, 1986 may make a one-time election at any age to have
the capital gain portion of the lump-sum distribution taxed as long-
term capital gain under a flat rate of 20%. If either capital gain
treatment election is made, neither capital gain treatment nor special
averaging treatment will be available for future lump-sum
distributions.
(e) Averaging Treatment. A Participant may elect special five-
year averaging treatment of the ordinary income portion of a lump-sum
distribution if (i) the distribution is received after the Participant
has attained age 59 1/2, (ii) the election applies to all lump-sum
distributions from different plans in the same taxable year, and (iii)
certain conditions are met regarding the uniform treatment of
distributions from all employee plans. Only one election is permitted
with respect to any Participant. The five-year averaging method treats
the distribution as if it were received evenly over a period of years,
and the tax is determined as if the taxable amount were the
recipient's only income and the recipient were a single taxpayer. A
Participant who attained age 50 before January 1, 1986, may make a
one-time election at any age with respect to a single lump-sum
distribution to use five-year averaging or ten-year averaging. If ten-
year averaging is elected, the tax rates effective in 1986 will be
applied rather than the
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<PAGE>
current rates. Such an election is in lieu of and not in addition to the
single post-age-59 1/2 election for five-year averaging.
(f) Rollover Treatment. The taxable portion of any distribution
payable to a Participant, Spousal Beneficiary, or Beneficiary of a
qualified domestic relations order is an "eligible rollover distribution"
unless it is part of a series of substantially equal payments payable over
the life of the Participant, the joint lives of the Participant and the
Participant's Beneficiary, or a period of ten years or more, or is a
required minimum payment under Code Section 401(a)(9). If the Participant
elects a direct rollover to an IRA or eligible retirement plan of any
portion of an eligible rollover distribution, the Participant will not be
taxed on the distribution until it is subsequently withdrawn. If an
eligible rollover distribution is not directly rolled over, however, but is
instead distributed to the Participant, the distribution is subject to
mandatory 20% income tax withholding by the Plan. The distribution may
still be rolled over within 60 days after it is received by the
Participant. If it is not rolled over, it will be includible in income in
accordance with the rules set forth above for distributions, but the income
tax withheld will be credited against the tax due. A distribution that does
not constitute an eligible rollover distribution is not subject to
mandatory withholding but is includible in income in accordance with the
rules set forth above for distribution. In addition, distributions not
rolled over may be subject to additional taxes as explained below. Finally,
a rollover may affect a Participant's right to elect lump-sum averaging or
capital gains treatment in the future.
(g) Distributions of Common Stock. The value of any Common Stock
distributed from the Plan is taxable at the time of distribution subject to
the following exceptions. Net unrealized appreciation attributable to
Common Stock is not treated as part of the taxable amount of a lump-sum
distribution unless the recipient elects otherwise. This applies whether or
not the Participant has participated in the applicable plan for five
years. If an election were made to include net unrealized appreciation in
the taxable amount of lump-sum distribution, the amount of net unrealized
appreciation would be eligible for averaging treatment to the extent such
treatment could otherwise be elected. Any net unrealized appreciation which
is not included in income as a result of a distribution will, to the extent
later realized in a taxable transaction, be taxed as long-term capital
gain, even though such taxable transaction may occur less than one year
after the distribution. Taxable distributions of Common Stock may be
subject to additional taxes, as explained below.
3. Additional Taxes.
(a) Early Withdrawal Penalty. An additional 10% income tax or early
withdrawal penalty tax is imposed on withdrawals and distributions made before a
Participant attains age 59 1/2, dies or becomes disabled. The penalty tax
applies only to the portion of a withdrawal or distribution which is otherwise
includible in income. It does not apply to withdrawals or distributions used to
pay medical expenses to the extent the expenses are deductible, or to payments
to an alternate payee pursuant to a qualified domestic relations order. The
penalty tax will also not apply to payments to a Participant made upon
separation from service if such separation occurs after the Participant attains
age 55.
(b) Penalty Tax on Excess Distribution. An additional 15% excise tax is
imposed on distributions that exceed certain amounts. The tax imposed in
addition to regular income taxes but is reduced by the 10% penalty tax on early
distributions if both apply to the same payment. The penalty tax on excess
distributions applies to the total of all distributions that an individual
receives during the same calendar year from all plans qualified under Section
401(a) of the Code (whether or not maintained by the same employer), all IRAs,
and certain tax-sheltered annuities. The 15% tax applies to the amount by which
the total of the Participant's regular distributions exceed the greater of
$150,000 or $148,500 in 1994 (indexed for the cost of living) per year and to
the amount by which the total of all lump-sum distributions as to which the
Participant elects income averaging exceeds the greater of $750,000 of five
times the indexed amount. The penalty tax does not apply to certain
distributions, including distributions
15
<PAGE>
made after the Participant's death (although the Code imposes a similar
federal estate tax), distributions paid to an alternate payee under a
qualified domestic relations order, a return of certain Participant
contributions, and distributions which receive rollover treatment.
4. Loans. A loan to a Participant should not be treated as a distribution
or withdrawal and should not be taxable. Payments of principal or interest are
not treated as contributions to the Plan for tax purposes. Interest paid on
loans secured by a Participant's Basic Account and interest paid on loans once a
Participant becomes a key employee (defined in Section 416(i) of the Code) is
not deductible. Interest paid on loans secured by other accounts to non-key
employees may be deductible. A Participant should consult his or her tax
advisor to determine the treatment of interest payments. If a default occurs
under the terms of the loan or the Plan and the underlying note is canceled, a
deemed distribution occurs which will be taxable in the same manner as other
distributions even though no money or other property is received.
5. Summary. The foregoing discussion of the federal income tax
consequences of the Plan presents only a brief general statement of complex tax
laws and regulations as of the date of this Prospectus. Congress may amend
ERISA and the Code at any time. In addition, the Internal Revenue Service may
at any time issue new or revised regulations and rulings. Such developments
could render all or a portion of the foregoing tax discussion obsolete. Nor
does the foregoing discussion address issues such as the tax treatment of
distributions from a Participant's IRA or state income tax treatment of
contributions, withdrawals, or distributions to and from the Plan. Therefore,
Participants and Beneficiaries should consult with a qualified tax advisor to
obtain current information as well as advice which is tailored to their
particular circumstances. Specific federal and state tax treatment relating to
a withdrawal or distribution should be reviewed with a tax advisor prior to
making any election and filing returns for any tax year in which any withdrawal
or distribution is made.
NONASSIGNABILITY OF BENEFITS
To the fullest extent permitted by law, benefits payable under the Plan are
not subject to the debts or liabilities of a Participant or Beneficiary. Any
attempt to assign or otherwise encumber or transfer such benefits, whether
payable presently or thereafter by a Participant, will be void. Similarly,
except for loans to a Participant or certain judicially ordered attachments
concerning child support, alimony, and marital property rights, no benefit under
the Plan will be subject to assignment, alienation, attachment, garnishment, or
encumbrance of any kind.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is subject to the provisions of Title I, Title II, and Title III
of ERISA, including provisions with respect to reporting, disclosure,
participation, vesting, and fiduciary responsibility. However, because the Plan
is a defined contribution plan rather than a defined benefit plan, no benefits
under the Plan will be guaranteed by the Pension Benefit Guaranty Corporation
under Title IV of ERISA, nor will the protective provisions of Title I regarding
funding apply. Such protections will not be extended to Participants by the
Company or by the Plan.
ADMINISTRATION
The Trustee is authorized to administer the Trust, to invest assets of the
Trust in the manner described in "Investments" above, and to exercise voting
rights attached to securities held in any investment fund and the Company's
Common Stock, in accordance with the Trust Agreement. The Company has the right
to appoint and remove the Trustee.
Expenses incurred in connection with the purchase, sale and transfer of
securities, governmental taxes (property, income, or other taxes, if any) levied
or assessed in connection with the operation of the Plan, and, with respect to
investment funds which invest in mutual funds or common trust funds, certain
fees and expenses of such mutual funds or common trust funds, and compensation
to the Trustee and investment managers are charged to the
16
<PAGE>
investment funds. Certain other expenses, including record keeping and legal
fees are borne by the Company, except that a portion of the fees incurred as a
result of a Participant's request for a deferred distribution will be charged to
that Participant (see "Distributions").
When purchasing shares of the Company's Common Stock for any of the
investment funds which call for such investment, the Trustee may purchase shares
on the open market or in private purchases. All purchases of the Company's
Common Stock will be at prices which, in the judgment of the Trustee, do not
exceed the fair market value of such shares. The Trustee will retain the
Company's Common Stock in the Company Stock Fund regardless of market
fluctuations. Cash balances in the Company Stock Fund, including the interim
investment thereof, must be limited to the amount necessary for administrative
needs such as cash distributions to Participants or transfers to other
investment funds.
The Committee may engage professional investment management firms (one or
more of which may be an affiliate of the Trustee) to manage the assets of those
investment funds which do not invest in shares of the Company's Common Stock.
The management firms are given full discretion in the selection of brokers to
effect securities transactions and in the direction of commission in exchange
for research services. Criteria applied in the selection of brokers include
competitive commission fees, quality of research, and the ability to execute
transactions at the best possible price. It is anticipated that assets will be
purchased and sold for the investment funds in the open market.
REVIEW COMMITTEE
1. Review Committee. There shall be established a Review Committee for
the purpose of hearing and determining all disputes which may arise out of the
application, interpretation, or administration of the Plan or with respect to
any Funding Agency utilized in connection therewith, or concerning participation
in or benefits under the Plan, or any action of the Company or a Participating
Employer in the discharge of its functions hereunder whether or not such
functions are expressly made subject to the consent, approval or review of the
Review Committee. The Review Committee shall consist of four members, two of
whom shall be selected by the Company and two of whom shall be selected by TCU,
each of which shall have one vote. Three members of the Review Committee shall
constitute a quorum for the transaction of business. All decisions and actions
taken by the Review Committee shall be by the affirmative vote or agreement of
not less than three members. All decisions of the Review Committee shall be
final and binding upon the Company, TCU, and any other person having an interest
in, under, or derived from the Plans. Meetings of the Review Committee may be
called by mutual agreement of the members at any time without notice. Such
meetings shall be conducted at the Company's offices or, without a formal
meeting, by the written authorization of all of the members thereof, or as
otherwise agreed to by the members of the Review Committee. The Review
Committee shall sit as a Special Board of Adjustment pursuant to Section 3,
Second of the Railway Labor Act with respect to all matters referable to it
under the Plan which matters shall not be subject to the grievance procedure
provided in the collective bargaining agreement between the Company or
Participating Employers and TCU as in effect from time to time.
2. Powers of Review Committee. The Review Committee shall determine all
disputes which may arise out of the application, interpretation, or
administration of the Plan with respect to any Funding Agency utilized in
connection therewith, or concerning participation in or benefits under the Plan
or any action of the Company or Participating Employer in the discharge of its
functions hereunder whether or not such functions are expressly made subject to
the consent, approval, or review of the Review Committee. The Review Committee
shall have full power to affirm, reverse, or otherwise modify any decision or
administrative action or proposed action which gave rise to any dispute. The
Review Committee shall have power to add to or subject from or modify any of the
terms of the Plan, via formal Plan amendments. The Review Committee shall have
the power to establish rules of procedure for the conduct of its business and of
hearings before it, which rules shall not be inconsistent with the provisions
of the Plan.
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<PAGE>
3. Claims Procedure
(a) Claims for Benefits. Inquiries about benefits under the Plan may
be made to appropriate Human Resources personnel of the Company and their
designated field representatives. Formal claims for benefits shall be made
in writing to the Review Committee. Written inquiries to Human Resources
personnel and field representatives that cannot be resolved within a
reasonable time will be treated as formal claims and forwarded to the
Review Committee, in which case the claimant shall be advised of this
action and of the claims procedure under the Plan.
(b) Notice of Denial of Claim. If a claim for benefits is wholly or
partially denied, the Review Committee shall, within a reasonable period of
time, but no later than 90 days after receipt of the claim, notify the
claimant of the denial of benefits. If special circumstances justify
extending the period up to an additional 90 days, the claimant shall be
given written notice of this extension within the initial 90-day period and
such notice shall set forth the special circumstances and the date a
decision is expected. A notice of denial:
(1) shall be written in a manner calculated to be understood by
the claimant; and
(2) shall contain (i) the specific reasons for denial of the
claim, (ii) specific reference to the Plan provisions on which the
denial is based, (iii) a description of any additional material or
information necessary for the claimant to perfect the claim, along
with an explanation why such material or information is necessary, and
(iv) an explanation of the Plan's claim review procedure.
(c) Request for Review of Denial of Claim. Within 60 days of the
receipt by the claimant of the written denial of his claim or, if the claim
has not been granted within a reasonable period of time (which shall not be
less than 90 days), the claimant may file a written request with the Review
Committee that it conduct a full review of the denial of the claim,
including a hearing, if deemed necessary by the Review Committee. In
connection with the claimant's appeal, the claimant may review pertinent
documents and may submit issues and comments in writing.
(d) Decision of Review of Denial of Claim. The Review Committee
shall deliver to the claimant a written decision on the claim promptly, but
not later than 60 days after the receipt of the claimant's request for such
review, unless special circumstances exist which justify extending this
period up to an additional 60 days. If the period is extended, the claimant
shall be given written notice of this extension during the initial 60-day
period. The decision on review of the denial of the claim:
(1) shall be written in a manner calculated to be understood by
the claimant;
(2) shall include specific reasons for the decisions; and
(3) shall contain specific references to the Plan provisions on
which the decision is based.
All decisions and actions taken by the Review Committee shall be final and
binding.
4. Review Functions. The Review Committee shall have the right to review
and examine, during normal business hours, all books, records, reports,
regulations, and procedures relative to the Plan, including Funding Agency
instruments, amendments, annual reports, Trustee reports for the Plan, Fund
accountings, and related data.
5. Liability. The Review Committee and any members thereof shall be
entitled to rely upon the correctness of any information furnished by the
Company and TCU. Neither the Review Committee nor any of its members, nor TCU,
nor any officers or other representatives of TCU, nor the Company, nor any
officers or other
18
<PAGE>
representatives of the Company, shall be liable because of any act or failure to
act on the part of the Review Committee, or any of its members, except that
nothing herein shall be deemed to relieve any such individual from liability for
his or her own fraud or bad faith.
AMENDMENT OF THE PLAN
The Company may make such amendments as are required by applicable law or
regulation. All other amendments shall be made in accordance with the Plan.
However, no amendment may (a) divert any assets of the Trust to purposes other
than for the exclusive benefit of Participants or their Beneficiaries or (b)
retroactively decrease the accrued benefits of any Participant accrued prior to
the effective date of the amendment, except that retroactive amendments to
preserve the tax qualified status of the Plan will be permitted as allowed by
law.
TERMINATION OF THE PLAN
The Company expects the Plan to continue. However, with the prior written
consent of TCU, and pursuant to the terms of the Railway Labor Act, a
Participating Employer, by action of the Review Committee, may terminate the
Plan as applicable to such Participating Employer and its employees. Upon
termination, the value of each Participant's interest in the Trust assets will
be determined as of the date of termination. Each account will continue to be
fully vested and nonforfeitable and distributions will be made in accordance
with the Plan and applicable law.
ADDITIONAL INFORMATION
Copies of the latest annual report to stockholders of the Company and the
latest annual report of the Plan are delivered to each employee to whom this
Prospectus is given unless such employee otherwise has received copies of such
reports, in which case the Company and the Plan will promptly furnish without
charge copies of the annual reports on written request of the employees.
EXPERTS
The consolidated financial statements and financial statement schedules of
the Company included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, incorporated by reference in this Prospectus, has been
incorporated herein in reliance on the report of Coopers & Lybrand, L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
LEGAL OPINION
The legality of the securities offered hereby and compliance with the
requirements of ERISA has been passed upon for the Company by Francis T. Kelly,
Esq., Securities and Finance Counsel of the Company.
19
<PAGE>
===============================================================================
TABLE OF CONTENTS
Page
Available Information.................................................. 2
Incorporation of Certain Documents by Reference........................ 2
Introduction........................................................... 3
Purposes of the Plan................................................... 3
Eligibility of Employees............................................... 3
Elective Contribution.................................................. 4
Limitations and Restrictions........................................... 4
Top-Heavy Provisions................................................... 5
Investments............................................................ 5
Accounts and Allocation................................................ 10
Valuations............................................................. 10
Vesting................................................................ 11
Distributions.......................................................... 11
Hardship Withdrawals................................................... 12
Loans.................................................................. 13
Federal Income Tax Consequences to Participants........................ 13
Nonassignability of Benefits........................................... 16
Employee Retirement Income Security Act of 1974........................ 16
Administration......................................................... 16
Review Committee....................................................... 17
Amendment of the Plan.................................................. 19
Termination of the Plan................................................ 19
Additional Information................................................. 19
Experts................................................................ 19
Legal Opinion......................................................... 19
-------------------------
Neither the delivery of this Prospectus nor any sales hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Burlington Northern 401(k) Plan for TCU Employees or Burlington
Northern Inc. since the date hereof. No person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representation must not be relied upon
as having been authorized by Burlington Northern Inc. or any participating
employer. This Prospectus does not constitute an offer to sell securities in
any state to any person to whom it is unlawful to make such offer in such state.
================================================================================
BURLINGTON
NORTHERN
INC.
Burlington Northern
401(k) Plan for TCU Employees
COMMON STOCK
----------
PROSPECTUS
----------
November 21, 1994
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 3. Incorporation of Certain Documents by Reference
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Commission. The Plan will also file reports with the Commission pursuant to
certain provisions of the Exchange Act. The following documents filed with the
Commission by the Company are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1993, as amended on Form 10-K/A dated October 5, 1994;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1994, as amended by Form 10-Q/A, June 30, 1994, as amended
by Form 10-Q/A, and September 30, 1994, including Amendment No. 1 on Form
10-Q/A for the quarters ended March 31, 1994, and June 30, 1994, each dated
October 5, 1994, respectively;
(3) The description of the Company's Common Stock contained in its
S-14 Registration Statement No. 2-71519, effective April 19, 1981.
In addition to the foregoing documents, all documents subsequently filed by
the Company or by the Plan pursuant to Sections 13(a), 13(c), 14, and 15(d) of
the Exchange Act, prior to the filing of a post-effective amendment to the
Registration Statement of which this Prospectus is a part which indicates that
all securities offered have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference herein
and to be a part hereof from the respective date of filing of such documents.
Any statement incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently-filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement modified or superseded shall not be deemed, except as
so modified or superseded, to constitute part of this Prospectus.
ITEM 5. Experts
The consolidated financial statements and financial statement schedules of
the Company included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the report of Coopers & Lybrand,
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
Legal Opinion
The legality of the securities offered hereby and compliance with the
requirements of ERISA has been passed upon for the Company by Francis T. Kelly,
Esq., Securities and Finance Counsel of the Company.
ITEM 6. Indemnification
Section 145 of the General Corporation Law of Delaware provides that a
corporation may indemnify directors and officers, as well as other employees and
individuals, against expenses (including attorneys' fees),
II-1
<PAGE>
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits, or proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation--
a "derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorney's fees) incurred in connection with
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement, or
otherwise.
Article X of the By-laws of the Registrant requires indemnification to the
full extent permitted under Delaware law as from time to time in effect.
Subject to any liabilities imposed by Delaware law, the By-laws provide by an
unconditional right to indemnification for all expenses, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
and amounts paid in settlement) actually and reasonably incurred by any person
in connection with any actual or threatened proceeding (including, to the extent
permitted by law, any derivative action) by reason of the fact that such person
is or was serving as a director or officer of the Registrant or, at the request
of the Registrant, of another corporation, partnership, joint venture, trust, or
other enterprise, including an employee benefit plan. The By-laws also provide
that the Registrant may, by action of its Board of Directors, provide
indemnification to its employees and agents with the same scope and effect as
the foregoing indemnification of directors and officers.
Officers and directors of the Registrant are covered by insurance which
(with certain exceptions and within certain limitations) indemnifies them
against losses and liabilities arising from any alleged "wrongful act,"
including any alleged error or misstatement or misleading statement, or wrongful
act or omission or neglect or breach of duty.
It is likely that if underwriters are utilized, they will agree to
indemnify, under certain conditions, the Registrant, its directors, certain of
its officers and persons who control the Registrant within the meaning of the
Securities Act of 1933 against certain liabilities.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
payments of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Article VIII of the Certificate of Incorporation of the Registrant provides
that to the full extent that the Delaware General Corporation Law, as it now
exists or may hereafter be amended, permits the limitation or elimination of the
liability of directors, a director of the Registrant shall not be liable to
Registrant or its stockholders from monetary damages for breach of fiduciary
duty as a director. Any amendment to or repeal of such Article VIII shall not
adversely affect any right or protection of any director of the Registrant for
or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
The By-laws of the Company provide for indemnification of directors and
officers to the full extent permitted or allowed by the laws of the state of
Delaware, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
II-2
<PAGE>
ITEM 8. Exhibits
Exhibit
Number Description of Document
------- -----------------------
3 Certificate of Incorporation, as amended, and By-laws, as
amended of Registrant are incorporated by reference to
Exhibit 3 of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 (Form 10-K, File No. 1-18159).
*4 Burlington Northern 401(k) Plan for TCU Employees
*5 Opinion of Counsel
*23 Consent of Independent Accountants is filed as Exhibit 23
hereto. Consent of Counsel is contained in the opinion filed
as Exhibit 5 to this Registration Statement.
*24 Powers of Attorney are contained on the signature page of
this Registration Statement.
- ---------------------
*Filed herewith, all other exhibits are incorporated by reference.
ITEM 9. Undertakings
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended, that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus to each employee to whom the Prospectus is sent
or given, a copy of the Registrant's annual report to stockholders for its last
fiscal year, unless such employee otherwise has received a copy of such report,
in which case, the Registrant shall state in the Prospectus that it will
promptly furnish without charge, a copy of such report on written request of the
employee. If the last fiscal year of the Registrant has ended within 120 days
prior to the use of the Prospectus, the annual report of the Registrant for the
preceding fiscal year may be so delivered, but within such 120-day period the
annual report for the last fiscal year will be furnished to any such employee.
The undersigned Registrant hereby undertakes to transmit or cause to
be transmitted to all employees participating in the Plan who do not otherwise
receive such material as stockholders of the Registrant, at the time and in the
manner such material is sent to its stockholders, copies of all reports, proxy
statements, and other communications distributed to its stockholders generally.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth, State of Texas, on this 15th day of
November 1994.
BURLINGTON NORTHERN INC.
By:/s/ EDMUND W. BURKE
-------------------------------
Edmund W. Burke,
Executive Vice President, Law
and Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Edmund W. Burke, Esq., and Douglas J. Babb, Esq., his or her true and lawful
attorney-in-fact and agent, each acting alone, with full power of substitution
and resubstitution, for him or her and in his or her name, place, and stead, in
any and all capacities, to sign any or all Amendments (including post-effective
Amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities as officers and/or directors of Burlington Northern Inc. on the
15th day of November 1994.
Signature Title
--------- -----
/s/ GERALD GRINSTEIN Chairman, Chief Executive
- ------------------------------ Officer and Director
(Gerald Grinstein)
/s/ DAVID C. ANDERSON Executive Vice President,
- ------------------------------ Chief Financial Officer
(David C. Anderson) and Chief Accounting Officer
/s/ JACK S. BLANTON Director
- ------------------------------
(Jack S. Blanton)
/s/ DANIEL P. DAVISON Director
- ------------------------------
(Daniel P. Davison)
/s/ DANIEL J. EVANS Director
- ------------------------------
(Daniel J. Evans)
II-4
<PAGE>
/s/ BARBARA C. JORDAN Director
- ------------------------------
(Barbara C. Jordan)
/s/ BEN F. LOVE Director
- ------------------------------
(Ben F. Love)
/s/ ARNOLD R. WEBER Director
- ------------------------------
(Arnold R. Weber)
/s/ EDWARD E. WHITACRE, JR. Director
- ------------------------------
(Edward E. Whitacre, Jr.)
/s/ MICHAEL B. YANNEY Director
- ------------------------------
(Michael B. Yanney)
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Plan has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Fort Worth and State
of Texas, on the 15th day of November 1994.
BURLINGTON NORTHERN
401(k) PLAN FOR TCU EMPLOYEES
By: /s/ EDMUND W. BURKE
----------------------------
Edmund W. Burke
Executive Vice President,
Law and Secretary
Burlington Northern Inc.
II-6
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
3 Certificate of Incorporation, as amended, and By-laws, as
amended, of Registrant are incorporated by reference to
Exhibit 3 of Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993 (Form 10-K, File No.
1-18159)
*4 Burlington Northern 401(k) Plan for TCU Employees
*5 Opinion of Counsel
*23 Consent of Independent Accountants is filed as Exhibit 23
hereto. Consent of Counsel is contained in the opinion
filed as Exhibit 5 to this Registration Statement
*24 Powers of Attorney are contained on the signature page of
this Registration Statement
- --------------
* Filed herewith, all other exhibits are incorporated by reference
<PAGE>
EXHIBIT 4
BURLINGTON NORTHERN 401(k) PLAN
FOR TCU EMPLOYEES
(Adopted Effective As of January 2, 1986,
And Restated Effective January 1, 1989)
<PAGE>
BURLINGTON NORTHERN 401(k) PLAN FOR TCU EMPLOYEES
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<C> <S> <C>
ARTICLE I GENERAL
Sec. 1.1 Name of Plan ................................... 1
Sec. 1.2 Purpose ........................................ 1
Sec. 1.3 Effective Date ................................. 1
Sec. 1.4 Company ........................................ 1
Sec. 1.5 Union .......................................... 1
Sec. 1.6 Construction and Applicable Law ................ 1
Sec. 1.7 Applicability of Future Amendments ............. 2
ARTICLE II MISCELLANEOUS DEFINITIONS
Sec. 2.1 Account ........................................ 3
Sec. 2.2 Active Participant ............................. 3
Sec. 2.3 Affiliate ...................................... 3
Sec. 2.4 Alternate Payee ................................ 3
Sec. 2.5 Beneficiary .................................... 3
Sec. 2.6 Board .......................................... 3
Sec. 2.7 Certified Earnings ............................. 3
Sec. 2.8 Code ........................................... 3
Sec. 2.9 Common Control ................................. 4
Sec. 2.10 Employment Commencement Date ................... 4
Sec. 2.11 ERISA .......................................... 4
Sec. 2.12 Fund ........................................... 4
Sec. 2.13 Funding Agency ................................. 4
Sec. 2.14 Highly Compensated Employee .................... 4
Sec. 2.15 Investment Fund ................................ 6
Sec. 2.16 Leased Employee ................................ 6
Sec. 2.17 Named Fiduciary ................................ 6
Sec. 2.18 Normal Retirement Age .......................... 6
Sec. 2.19 Participant .................................... 6
Sec. 2.20 Participating Employer ......................... 6
Sec. 2.21 Plan Year ...................................... 6
Sec. 2.22 Qualified Domestic Relations Order ............. 6
Sec. 2.23 Qualified Employee ............................. 7
Sec. 2.24 Review Committee ............................... 7
Sec. 2.25 Successor Employer ............................. 7
Sec. 2.26 Termination of Employment ...................... 7
Sec. 2.27 Valuation Date ................................. 7
ARTICLE III PLAN PARTICIPATION
Sec. 3.1 Entry Date ..................................... 8
Sec. 3.2 Eligibility for Participation .................. 8
Sec. 3.3 Duration of Participation ...................... 8
Sec. 3.4 No Guarantee of Employment ..................... 8
Sec. 3.5 Inactive Participants .......................... 8
</TABLE>
<PAGE>
BURLINGTON NORTHERN 401(k) PLAN FOR TCU EMPLOYEES
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<C> <S> <C>
ARTICLE IV DEPOSITS AND CONTRIBUTIONS
Sec. 4.1 Before Tax Deposits ................................ 10
Sec. 4.2 Sick Leave Deposits ................................ 11
Sec. 4.3 Source ............................................. 11
Sec. 4.4 Limitation on Allocations .......................... 11
Sec. 4.5 Adjustment of Employer Contributions
If Required by Code Section 401(k) ............... 13
ARTICLE V INVESTMENT FUNDS AND ACCOUNTS
Sec. 5.1 Accounts for Participants .......................... 16
Sec. 5.2 Investment Funds ................................... 16
Sec. 5.3 Investment Fund Designations ....................... 16
Sec. 5.4 Valuation of Investment Funds ...................... 16
Sec. 5.5 Valuation of Accounts
in Investment Fund ............................... 17
Sec. 5.6 Statement of Account ............................... 17
ARTICLE VI DESIGNATION OF BENEFICIARY
Sec. 6.1 Persons Eligible to Designate ...................... 18
Sec. 6.2 Special Requirements for
Married Participants ............................. 18
Sec. 6.3 Form and Method of Designation ..................... 18
Sec. 6.4 No Effective Designation ........................... 18
Sec. 6.5 Beneficiary May Not Designate ...................... 19
Sec. 6.6 Insurance Contract ................................. 19
ARTICLE VII BENEFIT REQUIREMENTS; WITHDRAWALS; LOANS
Sec. 7.1 Vesting ............................................ 20
Sec. 7.2 Benefit on Termination of Employment ............... 20
Sec. 7.3 Death .............................................. 20
Sec. 7.4 Divorce ............................................ 20
Sec. 7.5 Withdrawals While Employed ......................... 20
Sec. 7.6 Loans to Participants .............................. 22
ARTICLE VIII DISTRIBUTION OF BENEFITS
Sec. 8.1 Time and Method of Payment ......................... 26
Sec. 8.2 Accounting Following
Termination of Employment ........................ 27
Sec. 8.3 Reemployment ....................................... 27
Sec. 8.4 Source of Benefits ................................. 27
Sec. 8.5 Incompetent Payee .................................. 28
Sec. 8.6 Benefits May Not Be Assigned
or Alienated ..................................... 28
Sec. 8.7 Payment of Taxes ................................... 28
Sec. 8.8 Conditions Precedent ............................... 28
Sec. 8.9 Company Directions to Funding Agency ............... 28
</TABLE>
-ii-
<PAGE>
BURLINGTON NORTHERN 401(k) PLAN FOR TCU EMPLOYEES
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<C> <S> <C>
ARTICLE IX FUND
Sec. 9.1 Composition ........................................ 29
Sec. 9.2 Funding Agency ..................................... 29
Sec. 9.3 Compensation and Expenses
of Funding Agency ................................ 29
Sec. 9.4 No Diversion ....................................... 30
Sec. 9.5 Insurance Company Not Responsible
for Validity of Plan ............................. 30
ARTICLE X ADMINISTRATION OF PLAN
Sec. 10.1 Administration by Company .......................... 31
Sec. 10.2 Certain Fiduciary Provisions ....................... 31
Sec. 10.3 Discrimination Prohibited .......................... 32
Sec. 10.4 Evidence ........................................... 32
Sec. 10.5 Correction of Errors ............................... 32
Sec. 10.6 Records ............................................ 32
Sec. 10.7 General Fiduciary Standard ......................... 33
Sec. 10.8 Prohibited Transactions ............................ 33
Sec. 10.9 Claims Procedure ................................... 33
Sec. 10.10 Bonding ............................................ 33
Sec. 10.11 Waiver of Notice ................................... 33
Sec. 10.12 Agent for Legal Process ............................ 33
Sec. 10.13 Indemnification .................................... 33
Sec. 10.14 Expenses of Administration ......................... 34
ARTICLE XI AMENDMENT, TERMINATION MERGER
Sec. 11.1 Amendment .......................................... 35
Sec. 11.2 Reorganization of
Participating Employers .......................... 35
Sec. 11.3 Permanent Discontinuance
of Contributions ................................. 35
Sec. 11.4 Termination ........................................ 35
Sec. 11.5 Partial Termination ................................ 36
Sec. 11.6 Merger, Consolidation, or
Transfer of Plan Assets .......................... 36
Sec. 11.7 Deferral of Distributions .......................... 36
ARTICLE XII REVIEW COMMITTEE
Sec. 12.1 Review Committee ................................... 38
Sec. 12.2 Powers of the Review Committee ..................... 40
Sec. 12.3 Claims Procedure ................................... 40
Sec. 12.4 Review Functions ................................... 41
Sec. 12.5 Liability .......................................... 42
Sec. 12.6 Indemnity ......................................... 42
Sec. 12.7 Company Records .................................... 42
</TABLE>
-iii-
<PAGE>
BURLINGTON NORTHERN 401(k) PLAN FOR TCU EMPLOYEES
(Adopted Effective as of January 2, 1986)
Sec. 1.1 Name of Plan. The name of the 401(k) plan set forth herein is
-------------
"Burlington Northern 401(k) Plan for TCU Employees." It is sometimes herein
referred to as the "Plan."
Sec. 1.2 Purpose. The purposes of the Plan are to provide a means for
-------
employees to adopt a regular savings program and to provide a supplement to
their retirement income.
Sec. 1.3 Effective Date. The "Effective Date" of the Plan is January 2,
--------------
1986, the date as of which the Plan was established.
Sec. 1.4 Company. The "Company" is the Burlington Northern Railroad
-------
Company and any Successor Company thereof.
Sec. 1.5 Union. "Union" means the Transportation Communications Union
-----
(formerly Brotherhood of Railway, Airline and Steamship Clerks).
Sec. 1.6 Construction and Applicable Law. The Plan is intended to meet
-------------------------------
the requirements for qualification under Code Section 401(a) and to be in full
compliance with applicable requirements of ERISA. The Plan shall be administered
and construed consistent with said intent. It shall also be construed and
administered according to the laws of the State of Texas to the extent that such
laws are not preempted by the laws of the United States of America. All
controversies, disputes, and claims arising hereunder shall be submitted to the
United States District Court for the Northern District of Texas, Fort Worth
Division, except as otherwise provided in any trust agreement entered into with
a trustee. The Plan shall be construed in accordance with the following rules:
(a) Headings at the beginning of articles and sections hereof are for
convenience of reference, shall not be considered a part of the text
of the Plan, and shall not influence its construction.
(b) Capitalized terms used in the Plan shall have their meaning as
defined in the Plan unless the context clearly indicates to the
contrary.
(c) Any references to the masculine gender include the feminine and vice
versa.
(d) Use of the words "hereof," "herein," "hereunder," or similar
compounds of the word "here" shall mean and
<PAGE>
refer to the entire Plan unless the context clearly indicates to the
contrary.
(e) The provisions of the Plan shall be construed as a whole in such
manner as to carry out the provisions thereof and shall not be
construed separately without relation to the context.
Sec. 1.7 Applicability of Future Amendments. Except as may be
----------------------------------
specifically provided to the contrary, any amendment to the Plan shall apply
only to the benefits accrued to individuals who are employees of a Participating
Employer or Affiliate on or after the effective date of such amendment.
-2-
<PAGE>
ARTICLE II
MISCELLANEOUS DEFINITIONS
Sec. 2.1 Account. "Account" means a Participant's or Beneficiary's
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interest in the Fund as described in Sec. 5.1.
Sec. 2.2 Active Participant. An employee is an "Active Participant" if he
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is a Participant, if he is or has been a Qualified Employee, and if he has not
become an Inactive Participant pursuant to Section 3.5.
Sec. 2.3 Affiliate. "Affiliate" means any trade or business entity under
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Common Control with a Participating Employer, or under common Control with a
Predecessor Employer while it is such.
Sec. 2.4 Alternate Payee. "Alternate Payee" means a spouse, former
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spouse, child or other dependent of a Participant who is recognized by a
Qualified Domestic Relations Order as having a right to receive all or a portion
of the benefits payable under the Plan to a Participant.
Sec. 2.5 Beneficiary. "Beneficiary" means the person or persons
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designated as such bodies.
Sec. 2.6 Board. The "Board" is the board of directors of the Company,
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and includes any executive committees thereof authorized to act for such bodies.
Sec. 2.7 Certified Earnings. "Certified Earnings" of a Participant from
------------------
a Participating Employer for a Plan Year means the amount determined by the
Company to be the total compensation (base pay plus overtime earnings) paid to
the Participant by the Participating Employer during such Plan Year for service
as an Active Participant, subject to the following:
(a) Except as provided in subsection(b), allowances or reimbursements for
expenses, severance pay, payments or contributions to or for the
benefit of the employee under any other deferred compensations,
pension, profit sharing, insurance, or other employee benefit plan,
merchandise discounts, non-cash employee awards, or benefits in the
form of property or the use of property shall not be included in
computing Certified Earnings.
(b) If a Participant elects to have his compensation reduced for purposes
or having his employer make Before Tax Deposits, his Certified
Earnings shall be the amount he would have received but for the
reduction.
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(c) Effective for Plan Years beginning on or after January 1, 1995,
Certified Earnings shall not include any wages or other compensation
that are not covered by a collective bargaining agreement between the
Company or Participating Employer and the Union, or any extension or
renewal thereof.
Sec. 2.8 "Code". "Code" means the Internal Revenue Code of 1986 as from
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time to time amended.
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Sec. 2.9 Common Control. An entity (whether corporation, partnership,
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sole proprietorship, or otherwise) is under "Common Control" with another entity
(i) if both entities are corporations which are members of a controlled group of
corporation as defined in Code Section 414(b), or (ii) if both entities are
trades or businesses (whether or not incorporated) which are under common
control as defined in regulations under Code Section 414(c), or (iii) if both
entities are members of an "affiliated service group" as defined in Code Section
414(m) or otherwise required to be aggregated under Code Section 414(o).
However, in determining Common Control for purposes of determining which
entities are Affiliates and for purposes of applying the limits under Code
Section 415, the phrase "more than 50 percent" shall be substituted for the
phrase "at least 80 percent" each place it appears in Code Section 1563(a)(1)
(which is referred to in Code Section 414(b)) or in the regulations under Code
Section 414(c).
Sec. 2.10 Employment Commencement Date. "Employment Commencement Date"
----------------------------
means the date on which a person first becomes an employee of a Participating
Employer (whether before or after the Participating Employer becomes such) or an
Affiliate.
Sec. 2.11 ERISA. "ERISA" means the Employee Retirement Income Security
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Act of 1974 as from time to time amended.
Sec. 2.12 Fund. "Fund" means the aggregate of assets described in
----
Section 9.1.
Sec. 2.13 Funding Agency. "Funding Agency" is a trustee or trustees or
--------------
an insurance company appointed under Sec. 9.2 for the purpose of holding,
investing, and disbursing all or a portion of the Fund.
Sec. 2.14 Highly Compensated Employee. "Highly Compensated Employee"
---------------------------
shall include highly compensated active employees and highly compensated former
employees. A highly compensated active employee includes any employee who
performs service for the employer during the determination year, and who, during
the look-back year:
(i) received compensation from the employer in excess of $75,000 (as
adjusted pursuant to Code Section 415(d));
(ii) received compensation from the employer in excess of $50,000 (as
adjusted pursuant to Code Section 415(d)) and was a member of the
top-paid group for such year; or
(iii) was an officer of the employer and received compensation during such
year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A).
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The term Highly Compensated Employee also includes:
(i) Employees who are both described in the preceding sentence if the
term "determination year" is substituted for the term "look-back
year" and the employee is one of the 100 employees who received the
most compensation from the employer during the determination year;
and
(ii) employees who are 5-percent owners at any time during the look-back
year or determination year. If no officer has satisfied the
compensation requirement of (iii) above during either a determination
year or look-back year, the highest paid officer for such year shall
be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the employer during the
determination year, and was a highly compensated active employee for either the
separation year or any determination year ending on or after the employee's 55th
birthday.
If an employee is, during a determination year or look-back year, a
family member of either a 5-percent owner who is an active or former employee of
a Highly Compensated Employee who is one of the ten most highly compensated
employees ranked on the basis of compensation paid by the employer during such
year, then the family member of the 5-percent owner or top-ten Highly
Compensated Employee shall be treated as a single employee receiving
compensation and plan contributions or benefits equal to the sum of such
compensation and contributions or benefits of the family member and the
5-percent owner or top-ten Highly Compensated Employee. For purposes of this
section, family member includes the spouse, lineal ascendants and descendants of
the employee or former employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of employees in the top-paid
group, the top 100 employees, the number of employees treated as officers and
the compensation that is considered, will be made in accordance with Section
414(g) of the Code and the regulations thereunder.
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Sec. 2.15 Investment Fund. "Investment Fund" means any of the funds for
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investment of Plan assets established under Sec. 5.2.
Sec. 2.16 Leased Employee. "Leased Employee" means any person (other than
---------------
an employee of the recipient) who pursuant to an agreement between the recipient
and any other person ("leasing organization") has performed services for the
recipient. A leased employee shall not be considered an employee of the
recipient if: (i) such employee is covered by a money purchase pension plan
providing: (1) a non-integrated employer contribution, as defined in Code
Section 415(c)(3), but including amounts contributed by the employer pursuant to
a salary reduction agreement which are excludable from the employee's gross
income under Code Section 125, Section 401(a)(8), Section 402(h) or Section
403(b), (2) immediate participation, and (3) full and immediate vesting; and
(ii) leased employees do not constitute more than 20 percent of the recipient's
non-highly compensated work force.
Sec. 2.17 Named Fiduciary. The Company is a "Named Fiduciary" for
---------------
purposes of ERISA with, subject to the terms, conditions and restrictions
elsewhere contained in this Plan, authority to control or manage the operation
and administration of the Plan. Other persons are also Named Fiduciaries under
said Act if so provided by said Act. Such other person or persons shall have
such authority to control or manage the operation and administration of the
Plan, including control or management of the assets of the Plan, as may be
provided by said Act.
Sec. 2.18 Normal Retirement Age. "Normal Retirement Age" is age 65.
---------------------
Sec. 2.19 Participant. A "Participant" is an individual described as such
-----------
in Article III.
Sec. 2.20 Participating Employer. The Company, as well as Camas Prairie
----------------------
Railroad Company and Western Fruit Express Company, are Participating Employers
in the Plan. With the consent of the Company and the Union, any other
employer may also become a Participating Employer effective as of a date
specified by it in its adoption of the Plan. Also with such consent, any such
adopting employer may modify the provisions of the Plan as they shall be
applicable to its employees. Any Successor Employer to the Company shall also
be a Participating Employer.
Sec. 2.21 Plan Year. The "Plan Year" means the calendar year.
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Sec. 2.22 Qualified Domestic Relations Order. "Qualified Domestic
----------------------------------
Relations Order" means a judgment decree or order (including approval of a
property settlement agreement) pursuant
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to a state domestic relations law (including a community property law) that
provides benefits to an Alternate Payee in accordance with Code Section 414(p).
Sec. 2.23 Qualified Employee. "Qualified Employee" means any individual
------------------
who, at any time on or after the Effective Date is employed by a Participating
Employer, in a position where wages and working conditions are covered by the
collective bargaining agreement between the Company or Participating Employer
and the Union, or any extension or renewal thereof, during any part of a payroll
period.
Sec. 2.24 Review Committee. "Review Committee" means the committee
----------------
established under Article XII.
Sec. 2.25 Successor Employer. A "Successor Employer" is an entity that
------------------
succeeds to the business of a Participating Employer through merger,
consolidation, acquisition of all or substantially all of its assets, or any
other means; provided, however, that in the case of such succession with respect
to any Participating Employer other than the Company, the acquiring entity shall
be a successor Employer only if consent thereto is granted by the Company and
the Union.
Sec. 2.26 Termination of Employment. The "Termination of Employment" of
-------------------------
an employer of purposes of the Plan shall be deemed to occur on the date of
his resignation, discharge, retirement or death; provided, however, that
"Termination of Employment" shall not be deemed to occur upon a transfer
between any combination of Participating Employers and Affiliates of a
Participating Employer.
Sec. 2.27 Valuation Date. "Valuation Date" means the date on which the
--------------
Fund and Accounts are valued as provided in Article V. "Valuation Dates" will
be at least the last day of each quarter.
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ARTICLE III
PLAN PARTICIPATION
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Sec. 3.1 Entry Date. "Entry Date" means March 15, 1986, and thereafter
----------
the first day of January, April, July, and October of each year.
Sec. 3.2 Eligibility for Participation. Eligibility to participate in the
-----------------------------
Plan shall be determined in accordance with the following:
(a) Each Union-represented employee of a Participating Employer shall
become a Participant in the Plan on the earliest Entry Date, on or
after the date the Plan becomes effective with respect to his
Participating Employer, on which both of the following requirements
are met:
(1) He is a Qualified Employee.
(2) He has completed 60 days of service as a Qualified Employee.
(b) If a former Participant is reemployed, he shall again become a
Participant on the date he again becomes a Qualified Employee.
Sec. 3.3 Duration of Participation. A Participation shall continue to
-------------------------
be such until the later of:
(a) The date of his Termination of Employment.
(b) The date all benefits, if any, to which the Participant is entitled
hereunder have been distributed to him from the Fund.
Sec. 3.4 No Guarantee of Employment. Participation in the Plan does not
--------------------------
constitute a guarantee or contract of employment with the employee's
Participating Employer. Such participation shall in no way interfere with any
rights the Participating Employer would have in the absence of such
participation to determine the duration of the employee's employment with the
Participating Employer.
Sec. 3.5 Inactive Participants. Any Participant who
---------------------
(a) is no longer receiving any payroll earnings from a Participating
Employer;
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(b) occupies a position not covered by a collective bargaining agreement
(exempt position) or,
(c) discontinues deposits and contributions
shall be deemed in Inactive Participant and shall not be eligible to make
deposits under this Plan.
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ARTICLE IV
DEPOSITS AND CONTRIBUTIONS
--------------------------
A. Deposits
--------
Sec. 4.1 Before Tax Deposits. "Before Tax Deposits" are amounts
-------------------
contributed by a Participating Employer at the election of a Participant. A
Participant who elects to have Before Tax Deposits made in his behalf shall have
his current compensation from his Participating Employer reduced by an amount
equal to the Before Tax Deposits in any whole percentage of Certified Earnings
ranging from 1 percent to 25 percent. In no event may a Participant elect to
defer more than the dollar limit described in Code Section 402(a)(8), as indexed
from time to time. However, under Section 4.5, the Company may at any time
limit the maximum amount of Before Tax Deposits for an employee or group of
employees to a whole or fractional percentage of less than 25 percent. A
Participant may not elect Before Tax Deposits in an amount less than 1 percent
of his Certified Earnings. Participant elections regarding Before Tax Deposits
are subject to the following:
(a) Initial Election. Each person who has become a Participant may
----------------
direct the initial level of his Before Tax Deposits as of the next
Entry Date following his election.
(b) Subsequent Modifications. Each January, April, July, and October, an
------------------------
Active Participant may change the rate of his Before Tax Deposits to
any amount permitted under this section. In addition, a Participant
may at any time during a Plan Year discontinue his Deposits.
(c) Election Procedure. Elections under this section shall be made in
------------------
accordance with rules and procedures established by the Review
Committee.
(d) Before Tax Ceiling. Sick leave deposits and certified earnings
------------------
deposits cannot exceed 25 percent of base pay plus overtime.
(e) Internal Revenue Code Limits. In no event may the Participant's
----------------------------
Before Tax Deposits to this Plan, together with any elective deferrals
to any other plan, exceed the maximum allowable under the Internal
Revenue Code, Section 402(g)(5) or other applicable law adjusted for
each plan year to take into account any cost of living increase
prescribed for that year in accordance with the regulations
promulgated under Section 402(g)(5).
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If the Participant notifies the Review Committee in writing no later
than March 1 following the close of a taxable year of the amount of any excess
Before Tax Deposits due solely to the limits in paragraph (e) of this subsection
4.1, the Plan may, but need not, distribute such excess and any gain or loss
allocable to such excess to such Participant no later than April 15 following
such taxable year. If so distributed, such excess shall not be included as an
annual Addition for the immediately preceding Plan Year. The Participating
Employers shall cause the Before Tax Deposits with respect to any month to be
paid to the Funding Agency as early as practicable during the following month.
Before Tax Deposits shall be reflected in Accounts as provided in Article V.
Sec. 4.2 Sick Leave Deposits. Any Participant may elect to have his
-------------------
Participating Employer make Sick Leave Deposits to the Plan in lieu of his sick
leave buy-back days as contained in Rule 55G of the May 6, 1980 BN-BRAC
Agreement, as amended by Item 14 of Letter of Understanding dated November 21,
1985. Each Participant may elect to have his Participating Employer make
Deposits up to the maximum amount available for him as specified by said Rule
55G, as amended. Any such Deposits shall be made by the Participating Employer
at the time specified in Rule 55G and shall be credited to the participant's
Account as provided in Article V.
B. Limitations on Deposits
-----------------------
Sec. 4.3 Source. Deposits in support of the Plan by a participating
------
Employer shall be made only from its current or accumulated earnings or profits
determined according to generally accepted accounting practices.
Sec. 4.4 Limitation on Allocations. Notwithstanding any provisions of the
-------------------------
Plan to the contrary, allocations to Participants under the Plan shall not
exceed the maximum amount permitted under Code Section 415. For purposes of
the preceding sentence:
(a) The Annual Addition with respect to a Participant's Accounts in any
Plan Year shall not exceed the lesser of:
(1) $30,000 adjusted for each Plan Year to take into account any cost
of living increase provided for that year in accordance with
regulations prescribed by the Secretary of the Treasury.
(2) 25 percent of the Compensation of such Participant for such Plan
Year.
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(b) If for any Plan Year the limitations described in subsection (a) would
be exceeded with respect to any Participant, the Annual Additions
shall be adjusted in the following sequence, but only to the extent
necessary to reduce the Annual Additions to the level permitted in
subsection (a):
(1) The Participant's share of Before Tax Deposits under Code Section
401(k) shall be reduced and his Participating Employer shall pay
an equivalent amount to him in cash.
(2) If, after the adjustment in (1), there is an excess amount with
respect to a Participant for a Plan Year, such excess amount
shall be held unallocated in a suspense account. The suspense
account will be applied to reduce future employer contributions
for all Participants in the next Plan Year, and in each
succeeding Plan Year, if necessary. The suspense account will not
participate in the allocation of the investment gains and losses
of the Fund (and the value of such an account will not be taken
into account in valuing other Accounts under the Plan).
(c) The following definitions shall be applicable for purposes of this
section:
(1) "Annual Addition" means employer contributions (including
contributions made under Code Section 401(k). An Annual Addition
with respect to a Participant's Accounts shall be deemed
credited thereto with respect to a Plan Year if it is allocated
to the Participant's Accounts under the terms of the Plan as of
any date within such Plan Year.
(2) "Compensation" means total compensation paid to a Participant.
However, Compensation does not include deferred compensation,
stock options, and other distributions which receive special tax
benefit.
(d) Other Defined Contribution Plans. If the Participating Employer or
--------------------------------
an Affiliate maintains or maintained any other defined contribution
plan, as defined in Code Section 414(i), for its Employees, some or
all of whom are Participants of this Plan, then the limitation of
Section 4.1 shall apply to employer contributions, forfeitures, and
Employee contributions credited to the Participant under all such
plans.
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If a Participant receives allocation under this Plan and another
defined contribution plan, then any reductions necessary to make
allocations for the Participant under all such plans comply with the
limit of Section 4.1 shall first be made under such other plan, except
that the reductions shall be made first under this plan, except that
the reductions shall be made first under this Plan if the Participant
is covered under this Plan at a time during the Plan Year when he has
ceased to be covered under such other plan and is no longer eligible
to receive further allocation of Annual Additions for the year under
such other plan.
Any reductions in allocation under this Plan for such a Participant
which are necessary to comply with the above limitations shall be made
prospectively to above limitations shall be made prospectively to
contributions and other Annual Additions for the limitation year that
have not yet been credited to the Participant's Account.
(e) Defined Benefit Plans. If a Participant in this Plan is or was also a
---------------------
Participant in the defined benefit plan, as defined in section 414(j)
of the Code, maintained by the Participating employer or any
Affiliate, then in addition to the limitations contained in Section
4.1 of this Plan, the projected benefit of the Participant under the
defined benefit plan shall be limited to the extent necessary to
comply with the limitation set forth in Code Section 415(e).
(f) Limitation of Certain Annual Compensation. Certified Earnings, and
-----------------------------------------
any other elements of remuneration considered under the Plan, shall be
limited as necessary to comply with the requirement of Code Section
401(a)(17) (and related Code sections and regulations) such that the
annual compensation (within the meaning of such Code sections and
regulations) of each Employee taken into account under the Plan for
the year shall not exceed $200,000 (or such adjusted amount as may be
prescribed by the Secretary of the Treasury in connection with the
adjustments prescribed under Code Section 415(d)). Effective for Plan
Years beginning on or after the earlier of:
(1) The latest of:
(i) January 1, 1994;
(ii) The date of execution of an extension or replacement of
the last collective bargaining agreement between the
Company or Participating Employer and the Union in effect
on August 10, 1993; or
(2) January 1, 1997,
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$150,000 shall replace $200,000 where it appears in the preceding sentence.
Section 4.5 Adjustment of Deposits If Required by Code Section 401(k). If
---------------------------------------------------------
necessary to satisfy the requirements of Code Section 401(k), Before Tax
Deposits and Sick Leave Deposits shall be adjusted as follows:
(a) Each Plan Year the Company shall calculate the deferral percentage
for each Active Participant. Each such Participant's "deferral
percentage" is calculated by dividing his compensation, as defined in
Section 414(s) of the Code, for the Plan Year into the total Before
Tax Deposits and Sick Leave Deposits which would be allocated to such
Participant's Account for said Plan Year but for the limitations
imposed by this section.
(b) Each Plan Year the Company shall calculate the average deferral
percentage for Participants who are Highly Compensated Employees and
the average deferral percentage for Participants who are not Highly
Compensated Employees, subject to the following:
In each case the average is the average of the percentages calculated
under subsection (a) for all of the employees in the particular group.
(c) If the requirements of either paragraph (1) or (2) are satisfied, then
no further action is needed under this section:
(1) The average deferral percentage for Higher Paid Participants
is not more than 1.25 times the average deferral percentage
for Lower Paid Participants.
(2) The excess of the average deferral percentage for Higher Paid
Participants over the average deferral percentage for Lower
Paid Participants is not more than two percentage points, and
the average deferral percentage for Higher Paid Participants
is not more than 2.0 times the average deferral percentage
for Lower Paid Participants.
(d) If neither of the requirements of paragraph (c)(1) nor the
requirements of paragraph (c)(2) are satisfied, then one or more of
the following adjustments shall be made to the extent that the Review
Committee deems
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reasonably necessary so that the requirements of one of those
paragraphs are satisfied.
(1) The maximum percentage of Certified Earnings which the
Participating Employers may contribute as a Before Tax
Deposit and/or Sick Leave Deposit with respect to the Highly
Compensated Employee shall be reduced.
(2) The Participating Employers shall limit future Before Tax
Deposits and/or Sick Leave Deposits with respect to Highly
Compensated Employees.
(3) The Participating Employers shall distribute the excess
amount of such deposits (and gain or loss attributable
thereto) to Highly Compensated Employees in the order or
their average deferral percentages, beginning with the Highly
Compensated Employees with the highest average deferral
percentage until the limitations of this section are met.
Except as otherwise required by applicable regulations, any
amount distributed under this paragraph shall be included in
the Participant's taxable wages for the Plan Year for which
the contribution was made. The distribution described in this
section may be made notwithstanding any other Plan
provisions.
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ARTICLE V
INVESTMENT FUNDS AND ACCOUNTS
-----------------------------
Sec. 5.1 Accounts for Participants. An Account shall be established under
-------------------------
the Plan for each Participant who elects to have deposits made in his behalf.
All Before Tax Deposits and Sick Leave Deposits with respect to a Participant
shall be credited to his Account.
Sec. 5.2 Investment Funds. Investment Funds shall be established at the
----------------
direction of the Review Committee. The Review Committee shall determine the
types of investments to be held in each Investment Fund and the investment
manager, trustee, or insurance company responsible for selecting investments.
Income on investments of each Investment Fund shall be reinvested by the Funding
Agency in the same Investment Fund.
Sec 5.3 Investment Fund Designations. Deposits shall be invested in the
----------------------------
Investment Funds referred to in Sec. 5.2, pursuant to designations by the
respective Active and Inactive Participants.
No more than four times in each Plan Year, such Participant may change
his designation of the Investment Funds in which future Deposits shall be
invested.
No more than four times in each Plan Year, such Participant also may
direct a transfer of all or a part of his Account among the various Investment
Funds.
Elections under this section shall be made in accordance with rules
and procedures established by the Review Committee. Said rules may require that
the election be filed with the Company a reasonable time prior to the date it
will become effective.
Sec. 5.4 Valuation of Investment Funds. As of each Valuation Date, the
-----------------------------
Funding Agency shall determine, in accordance with a method consistently
followed and uniformly applied, the fair market value of each Investment Fund.
Promptly thereafter the Funding Agency shall advise the Review Committee of the
values so determined. During any period that all or a part of any Investment
Fund is held under a contract, a type sometimes referred to as a "guaranteed
income contract", issued by an insurance company and invested by it and under
which the insurance company pays a guaranteed minimum rate of return, and
provided no event has occurred that would result in a payment by the insurance
company under the contract at a discount from book value of the contract, the
fair market value of the contract shall be deemed to equal its book value.
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Sec. 5.5 Valuation of Accounts in Investment Funds. There shall be
-----------------------------------------
determined as of each Valuation Date the value of each Participant's various
accounts in the Investment Funds. The value of each such Account shall be
adjusted to reflect the effect of income, realized and unrealized profits and
losses, withdrawals, inter-fund transfers, and all other transactions since the
next preceding Valuation Date, as follows:
(a) From the value of the Account as of the preceding Valuation Date there
shall be deducted the amount of any distributions that were made
therefrom after the preceding Valuation Date.
(b) From the fair market value of the applicable Investment Fund
determined as of the Valuation Date by the Funding Agency there shall
be deducted the amount of any Deposits therein made for the valuation
period ending on the Valuation Date.
(c) The value of each such Account as determined in (a) shall be adjusted
pro rata so that the total value of all such Accounts in the
applicable Investment Fund equals the fair market value of the
applicable Investment Fund as determined and adjusted in (b).
(d) There shall then be added to the value of each Account determined as
provided in (c) the total of the Deposits for credit to such Account
made for the valuation period ending on the Valuation Date.
(e) Any transfers between Investment Funds pursuant to Sec. 5.3 shall then
be made and Accounts adjusted or established accordingly.
Sec. 5.6 Statement of Account. The Company, through the Funding Agency,
--------------------
shall issue a statement each quarter during each Plan Year advising each Active
and Inactive Participant of the amount held in his Account.
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ARTICLE VI
DESIGNATION OF BENEFICIARY
--------------------------
Sec. 6.1 Persons Eligible to Designate. Any Participant may designate a
-----------------------------
Beneficiary to receive any amount payable from the Fund as a result of the
Participant's death. The Beneficiary may be one or more persons, natural or
otherwise. By way of illustration, but not by way of limitation, the Beneficiary
may be an individual, trustee, executor, or administrator. A Participant may
also change or revoke a designation previously made, without the consent of any
Beneficiary named therein.
Sec. 6.2 Special Requirements for Married Participants. Notwithstanding
---------------------------------------------
the provisions of Sec. 6.1, if a Participant is married at the time of his
death, his Beneficiary shall be his spouse unless the spouse has consented in
writing to the designation of a different Beneficiary by name, the spouse's
consent acknowledges the effect of the election, and the spouse's consent is
witnessed by a representative of the Plan or a notary public. The previous
sentence shall not apply if it is established to the satisfaction of the Review
Committee that such consent cannot be obtained because there is no spouse,
because the spouse cannot be located or because of such other circumstances as
may be prescribed by federal regulations.
Sec. 6.3 Form and Method of Designation. Any designation or a revocation
------------------------------
of a prior designation of Beneficiary shall be in writing on such form as the
Company may prescribe and shall be filed with the Company. The Company and all
other parties involved in making payment to a Beneficiary may rely on the latest
Beneficiary designation on file with the Company at the time of payment or may
make payment pursuant to Sec. 6.4 if an effective designation is not on file,
shall be fully protected in doing so, and shall have no liability whatsoever to
any person making claim for such payment under a subsequently filed designation
of Beneficiary or for any other reason.
Sec. 6.4 No Effective Designation. If there is not on file with the
------------------------
Company an effective designation of Beneficiary by a deceased Participant, his
Beneficiary shall be the person or persons surviving him in the first of the
following classes in which there is a survivor, share and share alike:
(a) His spouse.
(b) His children, except that if any of his children predecease him but
leave issue surviving him, such issue shall take by right of
representation the share their parent would have taken, if living.
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(c) His parents.
(d) His brothers and sisters.
(e) His personal representative
(executor or administrator).
Determination of the identity of the Beneficiary in each case shall be made by
the Company.
Sec. 6.5 Beneficiary May Not Designate. Unless the Company on the
-----------------------------
prescribed Beneficiary designation form permits a Participant to elect that a
Beneficiary entitled to payments under the Plan may in turn designate a
Beneficiary, no Beneficiary may designate a successor Beneficiary. If a
Beneficiary is permitted to designate a successor Beneficiary, each such
designation shall be made according to the same rules applicable to designations
by Participants. In the event of the death of a Beneficiary who has so
designated a successor Beneficiary, the successor Beneficiary shall be entitled
to the balance of any payments remaining due. If a Beneficiary is not permitted
to designate a successor Beneficiary, or is permitted to do so but fails to make
such a designation, the balance of any payment remaining due will be payable to
a contingent Beneficiary if the Participant's Beneficiary designation so
provides, otherwise to the personal representative (executor or administrator)
of the deceased Beneficiary.
Sec. 6.6 Insurance Contract. Notwithstanding the foregoing provisions of
------------------
this Article, as to benefits payable under a contract issued by an insurance
company, said contract shall govern the designation of Beneficiary entitled to
benefits thereunder if inconsistent with the other provisions of this Article.
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<PAGE>
ARTICLE VII
BENEFIT REQUIREMENTS; WITHDRAWALS; LOANS
----------------------------------------
Sec. 7.1 Vesting. The interest of a Participant in his Account shall be
-------
fully vested in him at all times.
Sec. 7.2 Benefit on Termination of Employment. If a Participant's
------------------------------------
Termination of Employment occurs (for any reason other than his death), he shall
be entitled to a benefit equal to the value of his Account, determined as of the
Valuation Date coincident with or next following his Termination of Employment.
The benefit shall be paid at the times and in the manner determined under
Article VIII.
Sec. 7.3 Death. If a Participant's Termination of Employment is the result
-----
of his death, his Beneficiary shall be entitled to a benefit equal to the value
of his Account, determined as of the Valuation Date coincident with or next
following the date of his death. If a Participant's death occurs after his
Termination of Employment, his Beneficiary shall be entitled to such benefit as
the Participant would have been entitled thereafter from the Fund had he lived.
Benefits to which Beneficiaries become entitled under this section shall be paid
at the times and in the manner determined under Article VIII.
Sec. 7.4 Divorce. Benefits under the Plan, may be paid to an Alternate
-------
Payee pursuant to a Qualified Domestic Relations Order that is determined to be
an order described in Code Section 414(p) by the Review Committee.
Sec. 7.5 Withdrawals While Employed. A Participant whose benefits have not
--------------------------
commenced under Sections 7.2 and 7.3 may make withdrawals from his Accounts
subject to the following rules:
(a) He may elect to make a withdrawal from his Account at any time after
his attainment of age 59-1/2.
(b) If he has not attained age 59-1/2, he may request a withdrawal from his
Account for the purpose of enabling him to meet a hardship imposed by
an unusual or special situation in his financial affairs.
(1) For purpose of this Section 7.5 "financial hardship" means an
immediate and heavy financial need occurring in the personal
affairs of the Participant, including a need that is reasonably
foreseeable or voluntarily incurred by the Participant, as
determined by the Committee based on all relevant facts and
circumstances, taking into consideration that the need to pay the
funeral
-20-
<PAGE>
expenses of a family member would generally constitute an
immediate and heavy financial need and the need to purchase a boat
or television set generally would not. In any event, the following
distributions shall be deemed to be made on account of an
immediate and heavy financial need:
(i) Payment of medical expenses (described in Code
Section 213(d)) previously incurred by the
Participant, the Participant's spouse, or dependents
(as defined in Code Section 152), or necessary for
those persons to obtain medical care.
(ii) Purchase, excluding mortgage payments, of a
principal residence for the Participant.
(iii) Payment of tuition for the next twelve months of
post-secondary education for the Participant, the
Participant's spouse, children, or dependents.
(iv) Payment to prevent the eviction of the Participant
from this principal residence or the foreclosure of
the mortgage of the Participant's principal
residence.
(v) Such other deemed financial needs of published from
time to time by the Commissioner of Internal Revenue.
(vi) Payment of funeral expenses paid by the Participant
for a family member.
(vii) Loss of income due to layoff or disability of the
Participant or spouse.
(viii) Loss due to uninsured destruction or damage to the
Participant's property.
(2) A hardship distribution may not exceed the amount necessary to
meet the immediate and heavy financial need created by the
hardship and not capable of being satisfied from other resources
reasonably available to the Participant, generally including
assets held by his spouse or minor children, but not including
assets held for a child under an irrevocable trust or under the
Uniform Gift to Minors Act. The Committee shall consider all
relevant facts and circumstances and shall generally treat the
requested distribution as necessary to meet the financial need
upon receipt of a written representation that in the
- 21 -
<PAGE>
Participant's opinion his financial need cannot reasonably be
relieved:
(i) Through reimbursement or compensation by insurance or
otherwise,
(ii) By reasonable liquidation of the Participant's assets,
to the extent that such liquidation itself is feasible
and does not itself cause an immediate and heavy
financial need,
(iii) By suspension of the Participant's Before Tax Deposits
under the Plan, or
(iv) By other distributions or nontaxable loans from plans
maintained by the Employer and any other employer or by
borrowing from commercial sources on reasonable
commercial terms.
(3) The Committee may, without further investigation, accept the
written statement of the Participant as to the foregoing
matters unless it has reason to believe the statement is in
error. In addition, hardship withdrawals shall be further
limited to prevent the distribution of earnings arising after
1988 on Before Tax Deposits.
(c) Application for withdrawals shall be made on such forms as the Review
Committee prescribes and may be made at any time, effective upon the
last day of the month following satisfaction of the advance notice
requirements specified by the Review Committee. Distributions of
withdrawals shall be made in a lump sum as soon as is administratively
possible following such date. Withdrawal distributions shall be based
on the value of a Participant's Account as of the Valuation Date
immediately preceding, or coinciding with, the effective date of the
withdrawal. A Participant may make more than one withdrawal in any one
Plan Year.
Sec. 7.6 Loans to Participants and Beneficiary who are Parties in Interest
-----------------------------------------------------------------
of the Plan. The Review Committee may authorize a loan to an Active Participant
- -----------
or Beneficiary who are parties in interest of the Plan who makes application
therefor. Each such loan shall be subject to the following provisions:
(a) The amount of any loan to such Active Participant or Beneficiary shall
not exceed whichever of the following amounts is least:
(1) $50,000 or
-22-
<PAGE>
(2) Fifty percent (50%) of the account balance as of the Valuation
Date immediately preceding the date the loan is made.
(b) Loan may not be less than $1,000.
(c) Only one loan may be outstanding at any one time. Such Active
Participant or Beneficiary may only receive one loan in a twelve (12)
month period determined from the date of the last loan.
(d) To receive a loan from the Plan, such Active Participant and his spouse
must sign a promissory note in the proper amount on a form prescribed
by the Review Committee and authorize payroll deductions for payment of
interest and principal in accordance with procedures adopted by the
Review Committee. To secure repayment of the loan, the Participant and
his spouse, if any, shall, within the 90 day period before the loan is
made, consent to any distribution resulting from a setoff of the loan
against the Participant's Account. Each loan shall be adequately
secured as determined by the Review Committee. A loan shall be
considered adequately secured whenever the outstanding balance does not
exceed the amount in which the Participant would have a vested interest
in the event of his Termination of Employment.
(e) The Review Committee shall determine the rate of interest to be paid
with respect to each loan, which shall be a reasonable rate of interest
within the meaning of Section 408(b)(1)(D) and regulations promulgated
thereunder. The interest rate so determined shall be fixed for the term
of the loan.
(f) Each such loan shall provide for repayment in semimonthly/monthly
installments of interest and principal through regular payroll
deductions. The obligation to make repayments of principal and interest
shall be suspended during the period not to exceed 90 days that such
Active Participant is laid off but has not yet resulted in a
Termination of Employment and the term of the loan will be
automatically extended by the length of layoff; provided, however, in
no event may the term of the loan exceed five years. Where it is not
feasible in such a case to continue processing the loan repayments as
payroll deductions under a payroll system that currently covers such
Active Participant, the repayments shall be made by such Active
Participant by check on a monthly basis. Such Active Participant shall
be entitled on or after the twelfth (12th) month to prepay, without
penalty, the total accrued interest and
-23-
<PAGE>
outstanding principal amount of the loan by direct payment.
(g) Each loan shall extend for a stated period determined by agreement of
such Active Participant and the Review Committee, from one to five
years. Any outstanding loan shall become due and payable as of the
end of the second month following the month of the Termination of
Employment.
(h) In the event Termination of Employment occurs and such Active
Participant (i) either receives an immediate distribution of his
remaining account balance in the Plan or does not pay the total accrued
interest and outstanding principal amount of the loan within sixty (60)
days or (ii) is in default for ninety (90) days on any required loan
payment prior to his repayment of the total principal and interest on
an outstanding loan under the Plan, such Active Participant's note
shall be cancelled and the principal deemed distributed by the Fund to
him or, if applicable, his Beneficiary. The amount distributed will be
considered a withdrawal and will be subject to applicable tax
penalties.
(i) The Review Committee shall direct the Funding Agency with respect to
the making of loans to such Active Participants, the collection
thereof, and all other matters pertaining thereto, and the Funding
Agency shall follow such directions to the extent possible and shall
not take any independent action with respect to such loans. The Funding
Agency shall have no responsibility whatsoever with respect to loans to
Participants except to follow the directions of the Review Committee to
the extent possible.
(j) In accordance with the foregoing standards and requirements, loans
shall be available to all such Active Participants and Beneficiaries on
a reasonably equivalent basis.
(k) All loans shall be governed by such rules and regulations as the Review
Committee may adopt, and applications for loans shall be made on such
forms as the Review Committee may provide for such purpose.
(l) The Review Committee shall cause to be furnished to any such Active
Participant or Beneficiary receiving a loan any information required to
be furnished pursuant to the Federal Truth in Lending Act, if
applicable, or pursuant to any other applicable law.
-24-
<PAGE>
(m) The portion of such Active Participant's or Beneficiary's Account
represented by the outstanding loan principal shall be segregated and
shall not share in the income or losses of the Fund. In lieu thereof,
all interest paid by such Active Participant or Beneficiary on the loan
shall be allocated to the Participant's Account. The Funding Agency may
charge to such Active Participant's or beneficiary's Account any
expenses or losses attributable to the loan and such portion of the
general expenses of the Fund as the Funding Agency determines in the
discretion to be reasonable.
(n) Such Active Participant or beneficiary shall provide directions as to
the investments held in this Account that are to be liquidated to
provide the fund with cash equal to the loan principal.
(o) No loan shall be permitted prior to January 1, 1987.
(p) Notwithstanding any other provision in this Plan to the contrary, the
Company may amend the Plan at any time to cease the granting of loans
under this Plan.
Section 7.7 Distribution Rollovers. Effective January 1, 1993,
----------------------
notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Company, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement Plan
specified by the distributee in a Direct Rollover. In carrying out this Section,
the Committee may mail the distribution to the Distributee.
The following definitions apply to distribution rollovers permitted
under this subsection.
(a) "Eligible Rollover Distribution" is any distribution of all or
any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Code
Section 402(a)(9); and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).
-25-
<PAGE>
(b) "Eligible Retirement Plan" is an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account
or individual retirement annuity.
(c) "Distributee" includes an employee or former employee. In addition, the
employee's or former employee's surviving spouse and the employee's or
former employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the spouse or
former spouse.
(d) "Direct Rollover" is a payment by the Plan to the eligible retirement
plan specified by the distributee.
-25a-
<PAGE>
ARTICLE VIII
DISTRIBUTION OF BENEFITS
------------------------
Sec. 8.1 Time and Method of Payment. The benefit to which a Participant
--------------------------
or Beneficiary may become entitled under Article VII shall be distributed to him
as soon as practicable after he becomes so entitled or after the deferred
distribution date and according to the method he elects, subject to the
following:
(a) Distribution shall be made by one or a combination of the following
methods, as the Participant or Beneficiary may select:
(1) Payment in a single lump sum payment, as soon as practicable
after the Valuation Date which is coincident with or immediately
following Termination of Employment or after any deferred
Valuation Date.
(2) Payment in monthly, quarterly, semimonthly or annual installments
following Termination of Employment or after any deferred
Valuation Date over a period specified by the Participant or
Beneficiary. However, the period over which payments are made may
not exceed the longer of (i) a period-certain not longer than the
life expectancy of the Participant, or (ii) a period-certain not
longer than the joint life and last survivor expectancy of the
Participant and his designated Beneficiary.
However, if the value of the Participant's Account as of the Valuation
Date coincident with or next following his Termination of Employment
is $3,500 or less, payment will be made in a single sum and
installment distributions will not be permitted.
(b) The precise timing of any distribution is subject to normal processing
delays and any other administrative exigencies or special circumstances
affecting the distribution and cannot, therefore, be guaranteed. However,
distributions will normally be paid within approximately 45 days after the end
of the month following the later to occur of (i) the Participant's Termination
of Employment or other distribution event, or (ii) receipt of any properly
completed election form that is necessary to process the distribution. No
interest or investment gains or losses will be allocated for the processing
period with respect to an amount that is distributed. Moreover, unless the
Participant
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<PAGE>
otherwise elects in accordance with the Plan, the payment of his
benefits must begin no later than the sixtieth day after the close of
the Plan Year in which the Participant's Termination of Employment
occurs. However, if the amount of the payment to be made cannot be
determined by said date, a payment retroactive to such date may be
made no later than sixty (60) days after the earliest date on which
the amount of such payment can be ascertained.
(c) In all events, a distribution of all benefits must occur or
distributions in installments must commence by April 1 following the
calendar year in which the Participant attains age 70-1/2.
(d) If the Participant dies after beginning to receive payments in
installments over a period-certain pursuant to subsection (a)(2), the
remaining account balance (less any outstanding loan) shall be
distributed to his Beneficiary in an immediate single lump sum
payment.
(e) If the Participant dies before beginning to receive distributions, the
Participant's Accounts (less any outstanding loan) shall be
distributed to his Beneficiary in an immediate single lump sum
payment.
(f) If distributions are made in installments, the amount to be
distributed each year must be at least equal to the quotient obtained
by dividing the entire interest of the individual at the beginning of
the year by the number of remaining years in the payment period
including the current year.
Sec. 8.2 Accounting Following Termination of Employment. If distribution
----------------------------------------------
of all or any part of a benefit is deferred or delayed for any reason, the
undistributed portion of any Account shall continue to be revalued as of each
Valuation Date as provided in Article V.
Sec. 8.3 Reemployment. Distributions from the Fund shall cease upon
------------
reemployment of a Participant in a regular position by a Participating Employer,
and shall recommence in accordance with the provisions of this Article upon his
subsequent Termination of Employment.
Sec. 8.4 Source of Benefits. All benefits to which persons become
------------------
entitled hereunder shall be provided only out of the Fund and only to the extent
that the Fund is adequate therefor. No benefits are provided under the Plan
except those expressly described herein.
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<PAGE>
Sec. 8.5 Incompetent Payee. If a person entitled to payments hereunder is
-----------------
disabled from caring for his affairs because of mental condition, physical
condition, or age, payment due such person may be made to such person's
guardian, conservator, or other legal personal representative upon furnishing
the Review Committee with a court order from a court of competent jurisdiction.
Prior to the furnishing of such evidence, the Review Committee may cause
payments due to person or institution then caring for or maintaining the person
under disability. The Review Committee shall have no liability with respect to
payment so made. The Review Committee shall have no duty to make inquiry as to
the competence of any person entitled to receive payments hereunder.
Sec. 8.6 Benefits May Not Be Assigned or Alienated. Except as otherwise
-----------------------------------------
expressly permitted by the Plan or required by law, the interests of persons
entitled to benefits under the Plan may not in any manner whatsoever be assigned
or alienated, whether voluntarily or involuntarily, or directly or indirectly.
However, the Plan shall comply with the provisions of any court order which the
Review Committee determines is a Qualified Domestic Relations Order as defined
in Code Section 414(p).
Sec. 8.7 Payment of Taxes. The Funding Agency may pay any estate,
----------------
inheritance, income, or other tax, charge, or assessment attributable to any
benefit payable hereunder which in the Funding Agency's opinion it shall be or
may be required to pay out of such benefit. The Funding Agency may require,
before making any payment, such release or other document from any taxing
authority and such indemnity from the intended payee as the Funding Agency shall
deem necessary for its protection.
Sec. 8.8 Conditions Precedent. No person shall be entitled to a benefit
--------------------
hereunder until his right thereto has been finally determined by the Review
Committee nor until he has submitted to the Review Committee relevant data
reasonably requested by the Review Committee, including, but not limited to,
proof of birth or death.
Sec. 8.9 Company Directions to Funding Agency. The Company shall issue
------------------------------------
such written directions to the Funding Agency as are necessary to accomplish
distributions to the Participants and Beneficiaries in accordance with the
provision of the Plan.
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<PAGE>
ARTICLE IX
FUND
----
Sec. 9.1 Composition. All sums of money and all securities and other
-----------
property received by the Funding Agency for purposes of the Plan, together with
all investments made therewith, the proceeds thereof, and all earnings and
accumulations thereon, and the part from time to time remaining shall constitute
the "Fund". The Review Committee may cause the Fund to be divided into any
number of parts for investment purposes or any other purposes necessary or
advisable for the proper administration of the Plan.
Sec. 9.2 Funding Agency. The Fund may be held and invested as one fund or
--------------
may be divided into any number of parts for investment purposes. Each part of
the Fund, or the entire Fund if it is not divided into parts for investment
purposes, shall be held and invested by one or more trustees or by an insurance
company. The trustee or trustees of the insurance company so acting with respect
to any part of the Fund is referred to herein as the Funding Agency with respect
to such part of the Fund. The selection and appointment of each Funding Agency
shall be made by the Company with the prior written consent of the Union. The
Union or the Company shall have the right at any time to remove a Funding
Agency, in which case the Company shall appoint a successor thereto, with the
prior written consent of the Union subject only to the terms of any applicable
trust agreement or group annuity contract. The Review Committee shall have the
right to determine the form and substance of each trust agreement and group
annuity contract under which any part of the Fund is held, subject to the
requirement that they are not inconsistent with the provisions of the Plan. Any
such trust agreement may contain provisions pursuant to which the trustee will
make investments on direction of a third party.
The form and term of any trust agreement or group annuity contract and
any subsequent amendment thereto is subject to the written consent of the Review
Committee. The appointment or removal of an investment manager shall,
likewise, be made only with the written consent of the Review Committee.
Sec. 9.3 Compensation and Expense of Funding Agency. The Funding Agency
------------------------------------------
shall be entitled to receive such reasonable compensation for its services as
may be agreed upon with the Review Committee. The Funding Agency shall also be
entitled to reimbursement for all reasonable and necessary costs, expenses, and
disbursements incurred by it in the performance of its services. Such
compensation and reimbursements shall be paid from the Fund, except as
specifically agreed in writing by the Company and Union.
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<PAGE>
Sec. 9.4 No Diversion. The Fund shall be for the exclusive purpose of
------------
providing benefits to Participants under the Plan and their beneficiaries and
defraying reasonable expenses of administering the Plan. Such expenses may
include premiums for the bonding of Plan officials required by ERISA. No part
of the corpus or income of the Fund may be used for, or diverted to, purposes
other than for the exclusive benefit of Participants or their beneficiaries.
Notwithstanding the foregoing:
(a) If any contribution or portion thereof is made by a Participating
Employer by a mistake of fact, the Funding Agency shall, upon written
request of the Company, return such contribution to the Participating
Employer within one year after the payment of the contribution to the
Funding Agency.
(b) Contributions by a Participating Employer are conditioned upon initial
qualification of the Plan as to such Participating Employer under Code
Section 401(a). If the Plan does not qualify as to such Participating
Employer, the Funding Agency shall, upon written request of the
Company, return the amount of such contribution to the Participating
Employer within one year after the date of denial of qualification of
the Plan.
(c) If any contribution by a Participating Employer is conditioned upon
the deductibility of the contribution under Code Section 404, then, to
the extent the deduction is deemed disallowed, the Funding Agency
shall, upon written request of the Company, return such contribution
(to the extent disallowed) to the Participating Employer within one
year after the disallowance of the deduction.
(d) If any amounts remain in a suspense account under Code Section 415
upon termination of the Plan, such amounts may revert to the Company.
In the case of any such return of contribution the Company shall repay such
returned amounts to Participants in a manner which the Review Committee
considers fair and equitable under the circumstances.
Sec. 9.5 Insurance Company Not Responsible for Validity of Plan. No
------------------------------------------------------
insurance company that issues a contract under the Plan shall have any
responsibility for the validity of the Plan. An insurance company to which an
application may be submitted hereunder may accept such application and shall
have no duty to make any investigation or inquiry regarding the authority of the
applicant to make such application or any amendment thereto or to inquire as to
whether a person on whose life any contract is to be issued is entitled to such
contract under the Plan.
-30-
<PAGE>
ARTICLE X
ADMINISTRATION OF PLAN
----------------------
Sec. 10.1 Administration by Company. Subject to the Review Committee and
-------------------------
except as expressly otherwise provided herein, the Company shall control and
manage the operation and administration of the Plan and make all decisions and
determinations incident thereto. Except in cases where the Plan expressly
requires action on behalf of the Company to be taken by its board of directors,
action on behalf of the Company may be taken by any of the following:
(a) The Review Committee.
(b) The Vice President, Human Resources of the Company, or the officer
holding a position of comparable responsibilities, as directed by the
Review Committee.
Sec. 10.2 Certain Fiduciary Provisions. For purposes of the Plan:
----------------------------
(a) Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
(b) A Named Fiduciary, or a fiduciary designated by a Named Fiduciary
pursuant to the provisions of the Plan, may employ one or more persons
to render advice with regard to any responsibility such fiduciary has
under the Plan.
(c) To the extent permitted by any applicable trust agreement or group
annuity contract, a Named Fiduciary with respect to control or
management of the assets of the Plan may appoint any investment
manager or managers, as defined in ERISA, to manage (including the
power to acquire and dispose of) any assets of the Plan.
(d) At any time that the Plan has more than one Named Fiduciary, if
pursuant to the Plan provisions fiduciary responsibilities are not
already allocated among such Named Fiduciaries, the Review Committee
may provide for such allocation; except that such allocation shall not
include any responsibility, if any, in a trust agreement to manage or
control the assets of the Plan other than a power under the trust
agreement to appoint an investment manager as defined in ERISA.
(e) Unless expressly prohibited in the appointment of a Named Fiduciary
which is not the Company acting as provided in Sec. 10.1, such Named
Fiduciary by written instrument may designate a person or persons
other than
-31-
<PAGE>
such Named Fiduciary to carry out any or all of the fiduciary
responsibilities under the Plan of such Named Fiduciary; except that
such designation shall not include any responsibility, if any, in a
trust agreement to manage or control the assets of the Plan other
than a power under the trust agreement to appoint an investment
manager as defined in ERISA.
(f) A person who is a fiduciary with respect to the Plan, including a
Named Fiduciary, shall be recognized and treated as a fiduciary only
with respect to the particular fiduciary functions as to which such
person has responsibility.
Each Named Fiduciary, each other fiduciary, each person employed pursuant to
subsection (b) above, and each investment manager shall be entitled to receive
reasonable compensation for services rendered, or for the reimbursement of
expenses properly and actually incurred in the performance of their duties with
the Plan and to repayment therefor from the Fund.
Sec. 10.3 Discrimination Prohibited. No person or persons in exercising
-------------------------
discretion in the operation and administration of the Plan shall discriminate in
favor of shareholders, officers, or highly compensated employees of any
Participating Employer.
Sec. 10.4 Evidence. Evidence required of anyone under this Plan may be by
--------
certificate, affidavit, document, or other instrument which the person acting in
reliance thereon considers to be pertinent and reliable and to be signed, made,
or presented to the proper party.
Sec. 10.5 Correction of Errors. It is recognized that in the operation
--------------------
and administration of the Plan certain mathematical and accounting errors may be
made or mistakes may arise by reason of factual errors in information supplied
to the Company or Funding Agency. The Review Committee shall have power to cause
such equitable adjustments to be made to correct for such errors as the Review
Committee in its discretion considers appropriate. Such adjustments shall be
final and binding on all persons.
Sec. 10.6 Records. Each Participating Employer, each fiduciary with
-------
respect to the Plan, and each other person performing any functions in the
operation or administration of the Plan or the management or control of the
assets of the Plan shall keep such records as may be necessary or appropriate in
the discharge of their respective functions hereunder, including records
required by ERISA or any other applicable law. Records shall be retained as
long as necessary for the proper administration of the Plan and at least for any
period required by said Act or other applicable law.
-32-
<PAGE>
Sec. 10.7 General Fiduciary Standard. Each fiduciary shall discharge his
--------------------------
duties with respect to the Plan solely in the interests of Participants and
their beneficiaries and with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
Sec. 10.8 Prohibited Transactions. A fiduciary with respect to the Plan
-----------------------
shall not cause the Plan to engage in any prohibited transaction within the
meaning of ERISA.
Sec. 10.9 Claims Procedure. The Review Committee shall establish a
----------------
claims procedure consistent with the requirements of ERISA. Such claims
procedure shall provide adequate notice in writing to any Participant or
Beneficiary whose claim for benefits under the Plan has been denied, setting
forth the specific reasons for such denial, written in a manner calculated to be
understood by the claimant. A claimant whose claim for benefits has been denied
shall be afforded a reasonable opportunity for a full and fair review of the
decision denying the claim before the Review Committee pursuant to Article XII.
Sec. 10.10 Bonding. Plan personnel shall be bonded to the extent required
-------
by ERISA. Premiums for such bonding shall be paid from the Fund. However,
premiums for bonding of Union appointed members of the Review Committee shall be
paid by the Union.
Sec. 10.11 Waiver of Notice. Any notice required hereunder may be waived
----------------
by the person entitled thereto.
Sec. 10.12 Agent for Legal Process. The Company shall be the agent for
-----------------------
service of legal process with respect to any matter concerning the Plan, unless
and until the Company designates some other person as such agent.
Sec. 10.13 Indemnification. In addition to any other applicable
---------------
provisions for indemnification, the Participating Employers jointly and
severally agree to indemnify and hold harmless, to the extent permitted by law,
each director, each officer, and each employee of the Participating Employers
against any and all liabilities, losses, costs, or expenses (including legal
fees) of whatsoever kind and nature which may be imposed on, incurred by, or
asserted against such person at any time by reason of such person's service as a
fiduciary in connection with the Plan, but only if such person did not act
dishonestly, or in bad faith, or in willful violation of the law or regulations
under which such liability, loss, cost, or expense arises, and only to the
extent that such liabilities, losses, costs, or expenses are not paid through
insurance. Notwithstanding any of the foregoing provisions of this section to
the contrary, no indemnity shall be provided under this section to any person
for any liability, loss,
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costs, or expenses (including legal fees) arising out of the discharge of the
responsibilities under the Plan of the Review Committee and indemnification for
such liabilities, losses, costs, or expenses shall be limited to that provided
under Section 12.5.
Sec. 10.14 Expenses of Administration. Except as specifically otherwise
--------------------------
agreed in writing between the Company and the Union, or provided for herein, all
expenses of Plan administration (except investment management and brokerage
fees) shall be paid by the Company.
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ARTICLE XI
AMENDMENT, TERMINATION, MERGER
------------------------------
Sec. 11.1 Amendment. Subject to the non-diversion provisions of Sec. 9.4,
---------
the Company, with the prior written consent of the Union, or pursuant to the
terms of the Railway Labor Act, by action of the Review Committee, or by action
of a person so authorized by resolution of the Review Committee, may amend the
Plan at any time and from time to time; provided, however, that such amendments
as are required by applicable law or regulation may be made by the Company with
or without the Union's consent. No amendment of the Plan shall have the effect
of changing the rights, duties, and liabilities of any trustee without its
written consent. Also, no amendment shall divest a Participant or Beneficiary
of Accounts accrued prior to the amendment.
Sec. 11.2 Reorganization of Participating Employers. In the event two or
-----------------------------------------
more Participating Employers shall be consolidated or merged or in the event one
or more Participating Employers shall acquire the assets of another
Participating Employer, the Plan shall be deemed to have continued, without
termination and without a complete discontinuance of contributions as to all the
Participating Employers involved in such reorganization and their employees,
except that employees whose Termination of Employment shall occur at the time of
and because of such reorganization shall be entitled to benefits as in the case
of a complete discontinuance on contributions to the Plan. In such event, in
administering the Plan the corporation resulting from the consolidation, the
surviving corporation in the merger, or the employer acquiring the assets shall
be considered as a continuation of all of the Participating Employers in the
reorganization.
Sec. 11.3 Permanent Discontinuance of Contributions. With the prior
-----------------------------------------
written consent of the Union, or pursuant to the terms of the Railway Labor Act,
a Participating Employer, by action of its board of directors, may completely
discontinue its contributions in support of the Plan. In such event,
notwithstanding any provisions of the Plan to the contrary, (i) no employee of
such employer shall become a Participant after such discontinuance, and (ii)
each Participant in the employ of such employer at the time of such
discontinuance shall be 100% vested in his Accounts. Subject to the foregoing,
all of the provisions of the Plan shall continue in effect, and upon entitlement
thereto distributions shall be made in accordance with the provisions of Article
VIII.
Sec. 11.4 Termination. With the prior written consent of the Union, or
-----------
pursuant to the terms of the Railway Labor Act, a
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Participating Employer, by action of the Review Committee, may terminate the
Plan as applicable to such Participating Employer and its employees. After such
termination no employee of such employer shall become a Participant, and no
contributions shall be made by such employer. Each Participant in the employ of
his employer at the time of such termination shall be 100% vested in his
Accounts, he shall be entitled to a benefit equal to the value of his Accounts
determined as of the Valuation Date coincident with or next following the
termination of the Plan, distribution shall be made in accordance with the
provisions of Article VIII, and the Plan and any related trust agreement or
group annuity contract shall continue in force for the purpose of making such
distributions.
Sec. 11.5 Partial Termination. If there is a partial termination of the
-------------------
Plan as to a Participating Employer, by operation of law, by amendment of the
Plan, or for any other reason, which partial termination shall be confirmed by
the Company, each Participant with respect to whom the partial termination
applies shall be 100% vested in his Accounts. Subject to the foregoing, all of
the provisions of the Plan shall continue in effect as to each such Participant,
and upon entitlement thereto distributions shall be made in accordance with the
provisions of Article VIII.
Sec. 11.6 Merger, Consolidation or Transfer of Plan Assets. In the case
------------------------------------------------
of any merger or consolidation of the Plan with any other plan, or in the case
of the transfer of assets or liabilities of the Plan to any other plan,
provision shall be made so that each Participant and Beneficiary would (if such
other plan then terminated) receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated). No such merger,
consolidation, or transfer shall be effected until such statements with respect
thereto, if any, required by ERISA to be filed in advance thereof have been
filed.
Sec. 11.7 Deferral of Distributions. Notwithstanding any provisions of
-------------------------
the Plan to the contrary, in the case of a complete discontinuance of
contributions to the Plan by a Participating Employer or of a complete or
partial termination of the Plan with respect to a Participating Employer, the
Company or the Funding Agency may defer any distribution of benefit payments to
Participants and Beneficiaries with respect to which such discontinuance or
termination applies until after the following have occurred:
(a) Receipt of a final determination from the Treasury Department or any
court of competent jurisdiction regarding the effect of such
discontinuance or
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termination on the qualified status of the Plan under Code Section
401(a).
(b) Appropriate adjustments of Accounts to reflect taxes, costs, and
expenses, if any, incident to such discontinuance or termination.
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ARTICLE XII
REVIEW COMMITTEE
----------------
Sec. 12.1 Review Committee. There shall be established a Review Committee
----------------
for the purpose of hearing and determining all disputes which may arise out of
the application, interpretation, or administration of the Plan or with respect
to any Funding Agency utilized in connection therewith, or concerning
participation in or benefits under the Plan, or any action of the Company or a
Participating Employer in the discharge of its functions hereunder whether or
not such functions are expressly made subject to the consent, approval or review
of the Review Committee. The Review Committee shall act pursuant to the
following:
(a) The Review Committee shall consist of four members, two of whom shall
be selected by the Company and two of whom shall be selected by the
Union. The Company shall also select one alternate member who may act
for the member appointed by the Company in the event of absence or
inability to act of one of such members, and the Union shall likewise
select one alternate member who may act for the member appointed by
the Union in the event of the absence or inability to act of one of
such members. Either the Company or the Union at any time may remove
a member appointed by it and may select a member to fill any vacancy
among the members selected by it. Both the Company and the Union
shall, in writing, notify each other respectively concerning such
selections, which shall continue until further written notice.
(b) Three members of the Review Committee shall constitute a quorum for
the transaction of business. At all Review Committee meetings,
Company members present shall be entitled to one vote each and the
Union members shall be entitled to one vote each.
(c) The Review Committee shall have the authority to appoint
subcommittees to handle any problem within the jurisdiction of the
Review Committee. Such subcommittee shall report exclusively to the
Review Committee.
(d) The compensation, travel, and other reasonable living expenses, if
any, of members of the Review Committee selected by the Company which
are incidental to the holding of such meetings and performing
functions of the Review Committee shall be paid by the Company. The
compensation, travel, and other reasonable living expenses, if any,
of members of the Review Committee selected by the Union which are
incidental to the
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holding of such meetings and performing functions of the Review
Committee shall be paid by the Union.
(e) All decisions and actions taken by the Review Committee shall be by the
affirmative vote or agreement of not less than three members. Such
affirmative vote or agreement shall be in writing if given other than
during a meeting of the Review Committee. All decisions of the Review
Committee shall be final and binding upon the Company, the Union, and
any other person having an interest in, under, or derived from the
Plans. No ruling or decision of the Review Committee in one case shall
create a basis for a retroactive adjustment in any prior case.
(f) If the Review Committee shall fail to agree on any matter or dispute
coming before it, it shall within ten days from the date of such
failure to agree, designate an Impartial Referee. If the Review
Committee does not agree upon the selection of an Impartial Referee
within such 10-day period, then either the Company or the Union may
apply to the National Mediation Board for the designation by such
Mediation Board of an Impartial Referee. The matter or dispute shall be
submitted to the Review Committee sitting with the Impartial Referee
who shall act as Chairman during the proceedings pertaining to such
matter. Such Impartial Referee shall have one vote. Three affirmative
votes shall be required to render a decision or determination on
matters coming before the Review Committee sitting together with the
Impartial Referee.
(g) The compensation and expenses of the Impartial Referee shall be paid by
the National Mediation Board under the terms of the Railway Labor Act.
(h) Meetings of the Review Committee may be called by mutual agreement of
the members at any time without notice. Such meetings shall be
conducted at the Company's offices, or without a formal meeting by the
written authorization of all of the members thereof, or as otherwise
agreed to by the members of the Review Committee
(i) The Review Committee shall sit as a Special Board of Adjustment
pursuant to Section 3, second of the Railway Labor Act with respect to
all matters referable to it under the Plan which matters shall not be
subject to the grievance procedure provided in the collective
bargaining agreement between the Company or Participating Employers and
the Union as in effect from time to time. All decisions of the Review
Committee
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shall be final, binding and conclusive upon the Company, Participating
Employers, the Union, the Funding Agency, the Participants and
Beneficiaries, and any person having or claiming to have an interest in
the Plan and shall be enforceable in any court of competent
jurisdiction.
Sec. 12.2 Powers of the Review Committee. The Review Committee shall
------------------------------
determine all dispute which may arise out of the application, interpretation, or
administration of the Plan with respect to any Funding Agency utilized in
connection therewith, or concerning participation in or benefits under the Plan
or any action of the Company or Participating Employer in the discharge of its
functions hereunder whether or not such functions are expressly made subject to
the consent, approval, or review of the Review Committee. The Review Committee
shall have full power to affirm, reverse or otherwise modify any decision or
administrative action or proposed action which gave rise to any dispute. The
Review Committee shall have power to add to or subtract from or modify any of
the terms of the Plan, via formal plan amendments. The Review Committee shall
have the power to establish rules of procedure for the conduct of its business
and of hearings before it, which rules shall not be inconsistent with the
provisions of the Plan.
Sec. 12.3 Claims Procedure.
----------------
(a) Claims for Benefits. Inquiries about benefits under the Plan may be
-------------------
made to appropriate Human Resources personnel of the Company and their
designated field representatives. Formal claims for benefits shall be
made in writing to the Review Committee. Written inquiries to Human
Resources personnel and field representatives that cannot be resolved
within a reasonable time will be treated as formal claims and forwarded
to the Review Committee, in which case the claimant shall be advised of
this action and of the claims procedure under the Plan.
(b) Notice of Denial of Claim. If a claim for benefits is wholly or
-------------------------
partially denied, the Review Committee shall within a reasonable period
of time, but no later than 90 days after receipt of the claim, notify
the claimant of the denial of benefits. If special circumstances
justify extending the period up to an additional 90 days, the claimant
shall be given written notice of this extension within the initial
90-day period and such notice shall set forth the special circumstances
and the date a decision is expected. A notice of denial:
(1) Shall be written in a manner calculated to be understood by the
claimant; and
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(2) Shall contain (i) the specific reasons for denial of the claim,
(ii) specific reference to the Plan provisions on which the
denial is based, (iii) a description of any additional material
or information necessary for the claimant to perfect the claim,
along with an explanation why such material or information is
necessary, and (iv) an explanation of the Plan's claim review
procedures.
(c) Request for Review of Denial of Claim. Within 60 days of the receipt
-------------------------------------
by the claimant of the written denial of his claim or, if the claim has
not been granted within a reasonable period of time (which shall not be
less than 90 days described in Subsection (b)), the claimant may file a
written request with the Review Committee that it conduct a full review
of the denial of the claim, including a hearing if deemed necessary by
the Review Committee. In connection with the claimant's appeal, the
claimant may review pertinent documents and may submit issues and
comments in writing.
(d) Decision of Review of Denial of Claim. The Review Committee shall
-------------------------------------
deliver to the claimant a written decision on the claim promptly, but
not later than 60 days after the receipt of the claimant's request for
such review, unless special circumstances exist which justify extending
this period up to an additional 60 days. If the period is extended, the
claimant shall be given written notice of this extension during the
initial 60-day period. The decision on review of the denial of the
claim:
(1) Shall be written in a manner calculated to be understood by the
claimant;
(2) Shall include specific reasons for the decision; and
(3) Shall contain specific references to the Plan provisions on which
the decision is based.
All decisions and actions taken by the Review Committee shall be
governed by Section 12.1(e), (f), (g), (h) and (i) above.
Sec. 12.4 Review Functions. The Review Committee shall have the following
----------------
rights and review functions:
(a) To examine, during normal business hours, all books, records, reports,
regulations, and procedures relative to the Plan, including Funding
Agency instruments,
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amendments, annual reports, Trustee reports for the Plan, Fund
accountings, and related data.
(b) The Company and each Funding Agency, as the case may be, shall furnish
to the Union members of the Review Committee and the Union all records
and material set forth in subsection (a) above within 30 days from the
date on which such material may have been prepared or compiled; and in
any case annual reports (Form 5500) and Trustee reports for the Plan
shall each be furnished to the Union members of the Review Committee
and the Union not less frequently than once each year. The Union
members of the Review Committee may request and shall be entitled to
receive additional material and data relating to the foregoing.
(c) The Review Committee shall review the status and administration of the
Plan and Fund and in the appropriate case make recommendations to the
Company, the Union and the Funding Agency.
Sec. 12.5 Liability. The Review Committee and any members thereof shall
---------
be entitled to rely upon the correctness of any information furnished by the
Company and the Union. Neither the Review Committee nor any of its members, nor
the Union, nor any officers or other representatives of the Union, nor the
Company, nor any officers or other representatives of the Company, shall be
liable because of any act or failure to act on the part of the Review Committee,
or any of its members, except that nothing herein shall be deemed to relieve any
such individual from liability for his own fraud or bad faith.
Sec. 12.6 Indemnity. The Company as to employer members and alternate
---------
employer members of the Review Committee and the Union as to employee members
and alternate employee members of the Review Committee, shall indemnify, save
and hold harmless such members, respectively, from any and all loss, costs,
damage or expense which such members or any of them may incur or sustain,
arising out of the discharge of the responsibilities under the Plan of the
Review Committee, except to the extent that the same shall result from the gross
negligence or willful misconduct upon the part of such member or members.
Sec. 12.7 Company Records. The Company and the Funding Agency shall keep
---------------
or cause to be kept such records as may be necessary or appropriate in the
discharge of their respective duties hereunder. The records and reports
maintained or received by the Company or the Funding Agency in connection with
the administration of the Plan shall be available for inspection at all
reasonable times by the Review Committee or the Union and such consultants as
they may employ.
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IN WITNESS WHEREOF, the Company and Union have caused this Plan to be
executed by their duly authorized officers.
/s/ Donald W. Scott /s/
- ------------------------------ -----------------------------------
Vice President-Human Resources General Chairman
Burlington Northern Railroad Transportation Communications
Company, Camas Prairie Union
Railroad Company, Western
Fruit Express Company
/s/ Mark F. Brown
------------------------------------
Senior Vice General Chairman
Transportation Communications
Union
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EXHIBIT 5
(817)333-2366
November 18, 1994
Board of Directors
Burlington Northern Inc.
3800 Continental Plaza
777 Main Street
Fort Worth TX 76102
Gentlemen:
This will refer to the Registration Statement ("Registration Statement") on Form
S-8 filed by Burlington Northern Inc. with the Securities and Exchange
Commission, relating to the Burlington Northern 401(k) Plan for TCU Employees
(the "Plan").
I have examined or caused to be examined such documents, including the Plan, and
have made, or have caused to be made, such further investigation as I have
deemed necessary or appropriate in connection with this opinion.
I am of the opinion that the Plan is subject to the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and I am of the
further opinion that the provisions of the written documents should comply with
the requirements of ERISA pertaining to such provisions.
I am of the further opinion that the shares of Burlington Northern Inc. Common
Stock, no par value, will be, when issued in accordance with the terms and
conditions contained in the Registration Statement, validly issued, fully paid,
and non-assessable.
I hereby consent to the inclusion in the Registration Statement of this opinion
as an exhibit and the reference to me and this opinion the Prospectus thereof
under the caption "Legal Opinion."
Sincerely,
/s/ Francis T. Kelly
Francis T. Kelly
FTK:lm
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-8 of our
report dated January 17, 1994, on our audits of the consolidated financial
statements and financial statement schedules of Burlington Northern Inc. We also
consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Fort Worth, Texas
November 18, 1994
