UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8159
BURLINGTON NORTHERN INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1400580
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3800 Continental Plaza, 777 Main St.
Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 333-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No_____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
Common stock, $1.00 par value
as of October 31, 1995* 89,862,751 shares
*Burlington Northern Inc. is a wholly-owned subsidiary of Burlington Northern
Santa Fe Corporation and there is no market data with respect to such shares.
Registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format permitted by General Instruction H(2).
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements 1
Item 2. Management's Narrative Analysis of Results of
Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------ ------- ------ -------
<S> <C> <C> <C> <C>
Revenues $1,387 $1,249 $4,018 $3,651
Operating expenses:
Compensation and benefits 444 437 1,384 1,310
Equipment rents 114 97 346 314
Purchased services 101 120 315 352
Fuel 103 95 301 267
Depreciation and amortization 102 91 300 267
Materials 75 70 224 225
Other 92 110 282 327
Merger and severance 106 - 148 -
------ ------- ------ -------
Total operating expenses 1,137 1,020 3,300 3,062
------ ------- ------ -------
Operating income 250 229 718 589
Interest expense 49 40 142 118
Other income (expense), net 19 (1) 34 (7)
------ ------- ------ -------
Income before income taxes 220 188 610 464
Income tax expense 86 73 238 180
------ ------- ------ -------
Income before cumulative effect of
change in accounting method 134 115 372 284
Cumulative effect of change in
accounting method, net of tax - - - (10)
------ ------- ------ -------
Net income $ 134 $ 115 $ 372 $ 274
====== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1995 1994
----------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 29 $ 27
Accounts receivable, net 716 697
Materials and supplies 139 100
Current portion of deferred income taxes 174 156
Other current assets 53 32
----------- -------
Total current assets 1,111 1,012
Property and equipment, net 6,585 6,311
Investments in and advances to affiliates 886 38
Other assets 283 231
----------- -------
Total assets $8,865 $7,592
=========== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 1,453 $1,325
Long-term debt and commercial paper due
within one year 30 122
----------- -------
Total current liabilities 1,483 1,447
Long-term debt and commercial paper 2,423 1,697
Deferred income taxes 1,533 1,456
Casualty and environmental reserves 430 416
Other liabilities 422 339
----------- -------
Total liabilities 6,291 5,355
----------- -------
Stockholder's equity:
Convertible preferred stock and additional
paid-in capital 336 337
Common stock and additional paid-in capital 1,461 1,444
Retained earnings 787 485
Other (10) (29)
----------- -------
Total stockholder's equity 2,574 2,237
----------- -------
Total liabilities and stockholder's
equity $8,865 $7,592
=========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 372 $ 274
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting method - 10
Depreciation and amortization 300 267
Deferred income taxes 47 73
Other, net 39 (16)
Changes in current assets and liabilities:
Accounts receivable, net (17) (20)
Materials and supplies (40) (28)
Other current assets (21) (102)
Accounts payable and other current liabilities 136 131
-------- ------
Net cash flow from operating activities 816 589
-------- ------
Cash flows from investing activities:
Additions to property and equipment (560) (503)
Investments in and advances to affiliates (786) (7)
Other, net (8) 11
-------- ------
Net cash flow from investing activities (1,354) (499)
-------- ------
Cash flows from financing activities:
Net increase in commercial paper 524 44
Proceeds from issuance of long-term debt 522 149
Payments on long-term debt (421) (191)
Dividends paid (97) (96)
Other, net 12 4
-------- ------
Net cash flow from financing activities 540 (90)
-------- ------
Increase in cash and cash equivalents 2 -
Cash and cash equivalents:
Beginning of period 27 17
-------- ------
End of period $ 29 $ 17
======== ======
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 132 $ 108
Income taxes paid, net of refunds 161 54
Assets financed through capital lease obligations 4 50
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting policies and interim results
Burlington Northern Inc. (BNI) is a wholly-owned subsidiary of Burlington
Northern Santa Fe Corporation (BNSF). The 1994 Annual Report on Form 10-K for
BNI and its majority-owned subsidiaries (collectively BN) includes a summary
of significant accounting policies and should be read in conjunction with this
Form 10-Q. The principal subsidiary is Burlington Northern Railroad Company
(BNRR). The statements for the periods presented are condensed and do not
contain all information required by generally accepted accounting principles
to be included in a full set of financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments,
except as disclosed) necessary to present fairly BN's financial position as of
September 30, 1995 and December 31, 1994 and the results of operations for the
three-month and nine-month periods ended September 30, 1995 and 1994 and cash
flows for the nine-month periods ended September 30, 1995 and 1994 have been
included. The results of operations for any interim period are not
necessarily indicative of the results of operations to be expected for the
entire year. Certain prior year data has been reclassified to conform to the
current year presentation.
2. Acquisition of Santa Fe Pacific Corporation
On June 29, 1994, BNI and Santa Fe Pacific Corporation (SFP) entered into an
Agreement and Plan of Merger (as amended by amendments as of October 26, 1994,
December 18, 1994, January 24, 1995 and September 19, 1995, the Merger
Agreement) pursuant to which, on the terms and conditions set forth in the
Merger Agreement, SFP would merge with BNI (effected in the manner set forth
below, the Merger). Stockholders of BNI and SFP approved the Merger Agreement
at special stockholders' meetings held on February 7, 1995. On August 23,
1995, the Interstate Commerce Commission issued a written decision approving
the Merger and on September 22, 1995 the Merger was consummated.
Pursuant to the Merger Agreement, on December 23, 1994, BNI and SFP commenced
tender offers (together, the Tender Offer) to acquire 25 million and 38
million shares of SFP common stock, respectively, at $20 per share in cash.
During the first quarter of 1995, BNI borrowed $500 million under a credit
facility (the Tender Offer Facility) of which the proceeds were used to
finance BNI's purchase of 25 million shares of SFP common stock in the Tender
Offer. Funding of the Tender Offer was completed on February 21, 1995.
Also, pursuant to the Merger Agreement, BNI and SFP were entitled to elect to
consummate the Merger through the use of one of two possible structures: (i)
a merger of SFP with and into BNI and (ii) the Holding Company Structure
described below. To ensure that the transaction contemplated by the Merger
Agreement qualified as a tax-free transaction for federal income tax purposes,
the parties utilized the Holding Company Structure.
Under the Holding Company Structure, BNSF created two subsidiaries. One such
subsidiary merged with and into BNI, and the other such subsidiary merged with
and into SFP. Each holder of one share of BNI common stock received one share
of BNSF common stock and each holder of one share of SFP common stock,
excluding the SFP common stock acquired by BNI in the Tender Offer and the SFP
common stock held by SFP as treasury stock, received 0.41143945 shares of BNSF
common stock. The SFP common stock acquired by BNI in the Tender Offer
remains outstanding and the SFP common stock held by SFP as treasury stock
will be canceled. The rights of each stockholder of BNSF are substantially
identical to the rights of a stockholder of BNI, and the Holding Company
Structure has the same economic effect with respect to the stockholders of BNI
and SFP as would a direct merger of BNI and SFP.
3. Investments in and advances to affiliates
On February 21, 1995, BNI completed the acquisition of 25 million shares of
SFP common stock at $20 per share. The transaction was financed through the
$500 million Tender Offer Facility.
Prior to consummation of the Merger, BNI accounted for the $500 million
investment in SFP under the cost method. Upon consummation of the Merger, the
fair value adjustments which resulted from accounting for the investment under
the cost method were reversed and BNI's equity in earnings of SFP of $17
million was recorded as increases to the investment and other income. In
addition, BNI incurred $32 million of direct acquisition costs in conjunction
with the Merger which were included in the purchase price of SFP. Upon
consummation of the Merger, these costs were recorded as increases to the
investment.
In September 1995, BN advanced $275 million to BNSF to pay down a portion of
SFP's credit facility related to the Tender Offer. The remaining balance of
$62 million consists primarily of certain equity method investments.
4. Merger and severance expenses
During the second quarter of 1995, BN engaged in formal evaluations of certain
of its non-union work force requirements. Involuntary and voluntary
separation programs were announced which resulted in the elimination of
approximately 450 non-union employees in the third quarter. As a result,
expenses of $106 million were recorded for employee separation programs in the
third quarter, of which approximately $25 million resulted from pension
curtailments and related special termination benefits.
For the nine months ended September 30, 1995, merger and severance expenses
were $148 million, including $24 million related to the restricted stock which
vested upon approval of the Merger by the stockholders of BNI and SFP in
February 1995. At the time of vesting, unearned compensation associated with
the restricted stock, previously included in stockholder's equity, was charged
to expense. The remaining merger and severance expenses of $18 million were
the result of other non-union involuntary separation programs completed in
1995.
BN expects to record additional expenses in the fourth quarter of 1995 related
to additional personnel and asset rationalizations resulting from the Merger;
however, the amount of these expenses are presently not known. Additional
expenses may be recorded in periods subsequent to 1995 for similar items. At
the present time, the timing of and amount of any such subsequent expenses is
not known.
5. Stockholder's equity
Pursuant to the terms of the Merger Agreement, on September 22, 1995, each
share of the outstanding BNI common stock and convertible preferred stock was
converted into the right to receive one share of BNSF common stock and
convertible preferred stock, respectively, and each share of BNI common stock
held by BNI as treasury stock was canceled. Accordingly, BNSF became the
holder of 100 percent of BNI's common stock and convertible preferred stock.
In conjunction with the Merger, the per share par value of BNI convertible
preferred stock and BNI common stock became $.01 and $1.00, respectively.
As a result of the Merger, certain investments in third parties held by both
BNI and SFP, which were previously recorded on the cost method, were converted
to the equity method due to BNSF's combined ownership position and BNI's
ability to exercise significant influence. As such, $26 million, which is net
of deferred taxes of $17 million, was recorded as an increase to retained
earnings to reflect BNI's undistributed equity in earnings since initial
investment.
6. Environmental reserves and other contingencies
BN's operations, as well as those of its competitors, are subject to extensive
federal, state and local environmental regulation. BN's operating procedures
include practices to protect the environment from the environmental risks
which are inherent in railroad operations which frequently involve
transporting chemicals and other hazardous materials. Amounts expended
relating to such practices are inextricably contained in the normal day-to-day
costs of BN's business operations.
Many of BN's land holdings are and have been used for industrial or
transportation related purposes or leased to commercial or industrial
companies whose activities may have resulted in discharges onto the property.
As a result, BN is subject to environmental cleanup and enforcement actions.
In particular, the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980 (CERCLA), also known as the "Superfund" law, as well
as similar state laws generally impose joint and several liability for
clean-up and enforcement costs without regard to fault or the legality of the
original conduct on current and former owners and operators of a site. BN has
been notified that it is a potentially responsible party (PRP) for study and
clean-up costs at approximately 22 Superfund sites for which investigation and
remediation payments are or will be made or are yet to be determined (the
Superfund sites) and, in many instances, is one of several PRPs. In addition,
BN may be considered a PRP under certain other laws. Accordingly, under
CERCLA and other federal and state statutes, BN may be held jointly and
severally liable for all environmental costs associated with a particular
site. If there are other PRPs, BN generally participates in the clean-up of
these sites through cost-sharing agreements with terms that vary from site to
site. Costs are typically allocated based on relative volumetric contribution
of material, the amount of time the site was owned or operated, and/or the
portion of the total site owned or operated by each PRP.
Environmental costs include initial site surveys and environmental
studies of potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when BN's liability for
environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. BN conducts an ongoing environmental contingency analysis, which
considers a combination of factors including independent consulting reports,
site visits, legal reviews, analysis of the likelihood of participation in and
the ability of other PRPs to pay for clean-up, and historical trend analyses.
BN is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 185 sites, including the
Superfund sites, at which it is being asked to participate in the study and/or
clean-up of the environmental contamination. BN paid approximately $20
million during the nine months ended September 30, 1995 relating to mandatory
clean-up efforts, including amounts expended under federal and state voluntary
clean-up programs. BN has accruals of approximately $120 million for
remediation and restoration of all known sites, including $110 million
pertaining to mandated sites, of which approximately $45 million relates to
the Superfund sites. BN anticipates that the majority of the accrued costs at
September 30, 1995 will be paid over the next five years, with approximately
$9 million of payments occurring during the remainder of the year. No
individual site is considered to be material. Recoveries received from third
parties, net of legal costs incurred, were approximately $27 million during
the nine months ended September 30, 1995.
Liabilities for environmental costs represent BN's best estimates for
remediation and restoration of these sites and include both asserted and
unasserted claims. Unasserted claims are not considered to be a material
component of the liability. Although recorded liabilities include BN's best
estimates of all costs, without reduction for anticipated recoveries from
third parties, BN's total clean-up costs at these sites cannot be predicted
with certainty due to various factors such as the extent of corrective actions
that may be required, evolving environmental laws and regulations, advances in
environmental technology, the extent of other PRPs' participation in clean-up
efforts, developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, future charges to
income for environmental liabilities could possibly have a significant effect
on results of operations in a particular quarter or fiscal year as individual
site studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are typically
paid out over a long period, and are therefore not expected to have a material
adverse effect on BN's consolidated financial position or liquidity.
BNRR expects it will become subject to future requirements regulating air
emissions from diesel locomotives that may increase its operating costs.
During 1995, the Environmental Protection Agency must issue regulations
applicable to new locomotive engines. It is anticipated that these regulations
will be effective for locomotive engines installed after 1999. Under some
interpretations of federal law, older locomotive engines may be regulated by
states based on standards and procedures which the State of California
ultimately adopts. At this time it is unknown whether California will adopt
any locomotive emission standards.
BN is a party to a number of legal actions and claims, various governmental
proceedings and private civil suits arising in the ordinary course of
business, including those related to environmental matters and personal injury
claims. While the final outcome of these items cannot be predicted with
certainty, considering among other things the meritorious legal defenses
available, it is the opinion of management that none of these items, when
finally resolved, will have a material adverse effect on the annual results of
operations, financial position or liquidity of BN, although an adverse
resolution of a number of these items in a single year could have a material
adverse effect on the results of operations for that year.
7. Hedging activities
BNSF has a program to hedge against fluctuations in the price of its diesel
fuel purchases. This program includes forward purchases for delivery at
fueling facilities. Additionally, this program includes exchange-traded
petroleum futures contracts and various commodity swap and collar transactions
which are accounted for as hedges which are marked to market with any gains or
losses associated with changes in market value being deferred and recognized
as a component of fuel expense in the period in which the hedged fuel is
purchased and used.
As of September 30, 1995, BNRR had entered into agreements with fuel suppliers
setting the price of diesel fuel to be obtained by taking physical delivery
directly from such suppliers at a future date. The average price of the
approximately 85 million gallons which BNRR had committed to purchase was
approximately 49.5 cents per gallon. In addition, BNRR held petroleum futures
contracts representing approximately 80 million gallons at an average price of
approximately 49.1 cents per gallon. These contracts have expiration dates
ranging from October, 1995 to September, 1996. These prices do not include
taxes, fuel handling costs, certain transportation costs and any differences
which may occur from time to time between the prices of commodities hedged and
the purchase price of BNRR's diesel fuel.
BNRR's current fuel hedging program covers approximately 60 percent of BNRR's
projected fuel purchases for the fourth quarter of 1995 and approximately 15
percent of estimated 1996 fuel purchases. The current and future fuel delivery
prices are monitored continuously and hedge positions are adjusted
accordingly. Hedge positions are also closely monitored to ensure that they
will not exceed actual fuel requirements. Unrealized gains or losses from
BNRR's fuel hedging transactions were not material at September 30, 1995.
BNRR monitors its hedging positions and credit ratings of its counterparties
and does not anticipate losses due to counterparty nonperformance.
8. Other income (expense), net
Other income (expense), net includes the following (in millions):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Equity in earnings of SFP $ 17 $ - $ 17 $ -
Gain on property dispositions 2 6 11 7
Interest income 1 1 7 2
Accounts receivable sale fees - (3) - (7)
Miscellaneous, net (1) (5) (1) (9)
------ ------ ------ ------
Total $ 19 $ (1) $ 34 $ (7)
====== ====== ====== ======
</TABLE>
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
Management's narrative analysis relates to the financial condition and results
of operations of Burlington Northern Inc. (BNI) and its majority-owned
subsidiaries (collectively BN). The principal subsidiary is Burlington
Northern Railroad Company (BNRR).
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1994
BN recorded net income for the first nine months of 1995 of $372 million
compared with net income of $274 million for the same period in 1994. Results
for 1995 were reduced by $148 million of merger and severance expenses. The
corresponding reduction in net income was approximately $90 million. Results
for 1994 were reduced by a $10 million, net of tax, cumulative effect of an
accounting change for postemployment benefits. Excluding the above items, net
income for the first nine months of 1995 would have been $462 million compared
to $284 million for 1994.
REVENUES
The following table presents BN's revenue information by commodity for the
nine months ended September 30, 1995 and 1994 and includes certain
reclassifications of prior year information to conform to current year
presentation.
<TABLE>
<CAPTION>
Revenues
Revenue Per Thousand
Revenues Ton Miles Ton Miles
1995 1994 1995 1994 1995 1994
(In Millions) (In Millions)
<S> <C> <C> <C> <C> <C> <C>
Coal $1,329 $1,251 116,962 103,512 $11.36 $12.09
Agricultural Commodities 741 493 37,188 20,372 19.93 24.20
Intermodal 550 536 18,349 17,746 29.97 30.20
Minerals 251 254 9,780 10,060 25.66 25.25
Food & Consumer 218 215 7,108 7,184 30.67 29.93
Metals 211 188 9,072 8,402 23.26 22.38
Chemicals 194 182 6,740 6,545 28.78 27.81
Wood 185 199 8,699 9,706 21.27 20.50
Paper 133 131 3,983 4,181 33.39 31.33
Automotive 110 113 1,311 1,371 83.91 82.42
Other 96 89 - - - -
------ ------ ------- -------
Total $4,018 $3,651 219,192 189,079
====== ====== ======= =======
</TABLE>
Total revenues for the first nine months of 1995 were $4,018 million compared
with revenues of $3,651 million for the same period in 1994. The $367 million
increase was primarily due to improved Agricultural Commodities and Coal
revenues.
Coal revenues improved $78 million during the first nine months of 1995 due to
higher traffic levels caused primarily by new business, favorable weather
conditions early in the year and increased demand for low-sulfur coal from the
Powder River Basin. Partially offsetting this increase was a decline in
yields as a result of continuing competitive pricing pressures in contract
negotiations and a change in traffic mix.
Revenues from the transportation of Agricultural Commodities during the first
nine months of 1995 were $248 million greater than the first nine months of
1994. The increase was principally caused by improvements in corn and soybean
revenues of $234 million and $32 million, respectively, partially offset by
decreases in barley and wheat revenues. Corn and soybean revenues benefited
from increased crop production as well as higher traffic volumes to the
Pacific Northwest due to stronger export demand during the first nine months
of 1995. Barley and wheat revenues declined primarily due to weaker export
demand when compared with the strong demand in 1994. The shift in commodities
to lower yielding corn and soybeans from higher yielding wheat led to the
aggregate decrease in revenues per thousand revenue ton miles.
Intermodal and Metals revenues increased $14 million and $23 million,
respectively, when compared with the first nine months of 1994. The
improvement in Intermodal revenues was largely due to a $27 million increase
in intermodal international revenues resulting from new business and
continuing growth of existing business partially offset by a decrease in
intermodal domestic revenues. The improvement in Metals revenues resulted
primarily from increased taconite and coal coke revenues. Resumed production
at a plant closed by a labor strike during 1994 accounted for the majority of
the increase in taconite and coal coke revenues.
Current year revenues for Chemicals increased $12 million while Wood revenues
declined $14 million when compared to the first nine months of 1994. Strong
plastic demand contributed to the increase in Chemicals revenues; whereas,
lower traffic levels for lumber accounted for the majority of the decrease in
Wood revenues.
EXPENSES
Total operating expenses for the first nine months of 1995 were $3,300 million
compared with expenses of $3,062 million for the same period in 1994. Despite
the addition of $148 million of merger and severance expenses during the first
nine months of 1995, the operating ratio was 82 percent, an improvement of 2
percentage points compared with an operating ratio of 84 percent for the first
nine months of 1994. Excluding the merger and severance expenses, the
operating ratio for 1995 was 78 percent, an improvement of 6 percentage points
over the first nine months of 1994.
Compensation and benefits expenses were $74 million greater compared with the
first nine months of 1994. Increased traffic levels as well as a 4 percent
base wage increase for union represented employees effective July 1994 caused
increased wages and related payroll taxes of approximately $40 million. A $20
million increase in health and welfare costs for union employees due primarily
to an increase in insurance premium rates, and increased incentive
compensation expense also contributed to the higher compensation and benefits
expenses. These increases were partially offset by a $9 million payroll tax
refund in 1995.
Equipment rents expenses were $32 million higher than the first nine months of
1994 principally due to a $42 million increase in lease rental expense as a
result of a larger fleet of leased freight cars in 1995 as well as an increase
in the leasing of locomotives to meet power requirements.
Purchased services for the first nine months of 1995 decreased $37 million
from the first nine months of 1994. The most significant contributing factors
were lower derailment-related expenses and lower intermodal-related expenses.
Fuel expenses for 1995 were $34 million higher compared with 1994 primarily
due to a $26 million increase in consumption from higher traffic volumes in
1995. An increase in the average price paid for diesel fuel of 1.4 cents per
gallon to 59.0 cents per gallon in the first nine months of 1995 contributed
to the remainder of the increase.
Depreciation expense for the first nine months of 1995 was $33 million higher
than the same period in 1994 primarily due to an increase in BN's asset base
in 1995.
Materials expenses for the first nine months of 1995 was relatively flat
compared with 1994 as decreases in track materials costs in 1995 were offset
by increased locomotive materials expense.
Other operating expenses were $45 million lower compared with the first nine
months of 1994. These decreases were due to a $41 million decrease in costs
associated with personal injury claims and the recognition of a $14 million
gain from a sales-type capital lease of freight cars in the second quarter of
1995 partially offset by increased employee moving expenses.
During the first nine months of 1995, expenses of $148 million were recorded
for merger and severance expenses, including $24 million for the vesting of
restricted stock.
Interest expense for the period increased $24 million compared with the same
period in 1994, primarily resulting from the $500 million unsecured debt
incurred in 1995 to finance BNI's investment in Santa Fe Pacific Corporation
(SFP).
Other income (expense), net was $41 million higher in the first nine months of
1995 compared with the same period in 1994. This increase in income was due
to BNI's equity in earnings of SFP of $17 million, an increase in gain on
property dispositions, interest income received on the settlement of a tax
refund in 1995, and the elimination of fees on the sale of accounts receivable
in 1995 as the sales agreement expired in December 1994.
OTHER MATTERS
ACQUISITION OF SANTA FE PACIFIC CORPORATION (SFP)
On June 29, 1994, BNI and SFP entered into an Agreement and Plan of Merger (as
amended by amendments as of October 26, 1994, December 18, 1994, January 24,
1995 and September 19, 1995, the Merger Agreement) pursuant to which, on the
terms and conditions set forth in the Merger Agreement, SFP would merge with
BNI (effected in the manner set forth below, the Merger). Stockholders of BNI
and SFP approved the Merger Agreement at special stockholders' meetings held
on February 7, 1995. On August 23, 1995, the Interstate Commerce Commission
(ICC) issued a written decision approving the Merger and on September 22, 1995
the Merger was consummated.
Pursuant to the Merger Agreement, on December 23, 1994, BNI and SFP commenced
tender offers (together, the Tender Offer) to acquire 25 million and 38
million shares of SFP common stock, respectively, at $20 per share in cash.
During the first quarter of 1995, BNI borrowed $500 million under a credit
facility (the Tender Offer Facility) of which the proceeds were used to
finance BNI's purchase of 25 million shares of SFP common stock in the Tender
Offer. Funding of the Tender Offer was completed on February 21, 1995.
Also, pursuant to the Merger Agreement, BNI and SFP were entitled to elect to
consummate the Merger through the use of one of two possible structures: (i)
a merger of SFP with and into BNI and (ii) the Holding Company Structure
described below. To ensure that the transaction contemplated by the Merger
Agreement qualified as a tax-free transaction for federal income tax purposes,
the parties utilized the Holding Company Structure.
Under the Holding Company Structure, BNSF created two subsidiaries. One such
subsidiary merged with and into BNI, and the other such subsidiary merged with
and into SFP. Each holder of one share of BNI common stock received one share
of BNSF common stock and each holder of one share of SFP common stock,
excluding the SFP common stock acquired by BNI in the Tender Offer and the SFP
common stock held by SFP as treasury stock, received 0.41143945 shares of BNSF
common stock. The SFP common stock acquired by BNI in the Tender Offer
remains outstanding and the SFP common stock held by SFP as treasury stock
will be canceled. The rights of each stockholder of BNSF are substantially
identical to the rights of a stockholder of BNI, and the Holding Company
Structure has the same economic effect with respect to the stockholders of BNI
and SFP as would a direct merger of BNI and SFP.
The August 23, 1995, ICC decision authorized the Merger, the resulting common
control of BNRR and The Atchison, Topeka and Santa Fe Railway Company (ATSF)
by the merged company, the consolidation of BNRR and ATSF by the merged
company, the consolidation of BNRR and ATSF operations, and the merger of BNRR
and ATSF. As of this date, BNSF is giving consideration to a plan to
merge the BNRR and ATSF legal entities. The final decision to merge BNRR and
ATSF, as well as the timing of any such merger, depends upon the resolution of
various business, tax and legal factors now under consideration.
In the third quarter of 1995, BNI recorded merger and severance expenses of
$106 million. BNI expects to record additional expenses in the fourth quarter
of 1995 related to additional personnel and asset rationalizations resulting
from the Merger; however, the amount of these expenses are presently not
known. Additional expenses may be recorded in periods subsequent to 1995 for
similar items. At the present time, the timing of and amount of any such
subsequent expenses is not known.
ENVIRONMENTAL ISSUES
BN's operations, as well as those of its competitors, are subject to extensive
federal, state and local environmental regulation. BN's operating procedures
include practices to protect the environment from the environmental risks
which are inherent in railroad operations which frequently involve
transporting chemicals and other hazardous materials. Amounts expended
relating to such practices are inextricably contained in the normal day-to-day
costs of BN's business operations.
Many of BN's land holdings are and have been used for industrial or
transportation related purposes or leased to commercial or industrial
companies whose activities may have resulted in discharges onto the property.
As a result, BN is subject to environmental cleanup and enforcement actions.
In particular, the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980 (CERCLA), also known as the "Superfund" law, as well
as similar state laws generally impose joint and several liability for
clean-up and enforcement costs without regard to fault or the legality of the
original conduct on current and former owners and operators of a site. BN has
been notified that it is a potentially responsible party (PRP) for study and
clean-up costs at approximately 22 Superfund sites for which investigation and
remediation payments are or will be made or are yet to be determined (the
Superfund sites) and, in many instances, is one of several PRPs. In addition,
BN may be considered a PRP under certain other laws. Accordingly, under
CERCLA and other federal and state statutes, BN may be held jointly and
severally liable for all environmental costs associated with a particular
site. If there are other PRPs, BN generally participates in the clean-up of
these sites through cost-sharing agreements with terms that vary from site to
site. Costs are typically allocated based on relative volumetric contribution
of material, the amount of time the site was owned or operated, and/or the
portion of the total site owned or operated by each PRP.
Environmental costs include initial site surveys and environmental
studies of potentially contaminated sites as well as costs for remediation and
restoration of sites determined to be contaminated. Liabilities for
environmental clean-up costs are initially recorded when BN's liability for
environmental clean-up is both probable and a reasonable estimate of
associated costs can be made. Adjustments to initial estimates are recorded
as necessary based upon additional information developed in subsequent
periods. BN conducts an ongoing environmental contingency analysis, which
considers a combination of factors including independent consulting reports,
site visits, legal reviews, analysis of the likelihood of participation in and
the ability of other PRPs to pay for clean-up, and historical trend analyses.
BN is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 185 sites, including the
Superfund sites, at which it is being asked to participate in the study and/or
clean-up of the environmental contamination. BN paid approximately $20
million during the nine months ended September 30, 1995 relating to mandatory
clean-up efforts, including amounts expended under federal and state voluntary
clean-up programs. BN has accruals of approximately $120 million for
remediation and restoration of all known sites, including $110 million
pertaining to mandated sites, of which approximately $45 million relates to
the Superfund sites. BN anticipates that the majority of the accrued costs at
September 30, 1995 will be paid over the next five years, with approximately
$9 million of payments occurring during the remainder of the year. No
individual site is considered to be material. Recoveries received from third
parties, net of legal costs incurred, were approximately $27 million during
the nine months ended September 30, 1995.
Liabilities for environmental costs represent BN's best estimates for
remediation and restoration of these sites and include both asserted and
unasserted claims. Unasserted claims are not considered to be a material
component of the liability. Although recorded liabilities include BN's best
estimates of all costs, without reduction for anticipated recoveries from
third parties, BN's total clean-up costs at these sites cannot be predicted
with certainty due to various factors such as the extent of corrective actions
that may be required, evolving environmental laws and regulations, advances in
environmental technology, the extent of other PRPs' participation in clean-up
efforts, developments in ongoing environmental analyses related to sites
determined to be contaminated, and developments in environmental surveys and
studies of potentially contaminated sites. As a result, future charges to
income for environmental liabilities could possibly have a significant effect
on results of operations in a particular quarter or fiscal year as individual
site studies and remediation and restoration efforts proceed or as new sites
arise. However, expenditures associated with such liabilities are typically
paid out over a long period, and are therefore not expected to have a material
adverse effect on BN's consolidated financial position or liquidity.
BNRR expects it will become subject to future requirements regulating air
emissions from diesel locomotives that may increase its operating costs.
During 1995, the Environmental Protection Agency must issue regulations
applicable to new locomotive engines. It is anticipated that these regulations
will be effective for locomotive engines installed after 1999. Under some
interpretations of federal law, older locomotive engines may be regulated by
states based on standards and procedures which the State of California
ultimately adopts. At this time it is unknown whether California will adopt
any locomotive emission standards.
HEDGING ACTIVITIES
BNSF has a program to hedge against fluctuations in the price of its diesel
fuel purchases. This program includes forward purchases for delivery at
fueling facilities. Additionally, this program includes exchange-traded
petroleum futures contracts and various commodity swap and collar transactions
which are accounted for as hedges which are marked to market with any gains or
losses associated with changes in market value being deferred and recognized
as a component of fuel expense in the period in which the hedged fuel is
purchased and used.
As of September 30, 1995, BNRR had entered into agreements with fuel suppliers
setting the price of diesel fuel to be obtained by taking physical delivery
directly from such suppliers at a future date. The average price of the
approximately 85 million gallons which BNRR had committed to purchase was
approximately 49.5 cents per gallon. In addition, BNRR held petroleum futures
contracts representing approximately 80 million gallons at an average price of
approximately 49.1 cents per gallon. These contracts have expiration dates
ranging from October, 1995 to September, 1996. These prices do not include
taxes, fuel handling costs, certain transportation costs and any differences
which may occur from time to time between the prices of commodities hedged and
the purchase price of BNRR's diesel fuel.
BNRR's current fuel hedging program covers approximately 60 percent of BNRR's
projected fuel purchases for the fourth quarter of 1995 and approximately 15
percent of estimated 1996 fuel purchases. The current and future fuel delivery
prices are monitored continuously and hedge positions are adjusted
accordingly. Hedge positions are also closely monitored to ensure that they
will not exceed actual fuel requirements. Unrealized gains or losses from
BNRR's fuel hedging transactions were not material at September 30, 1995.
BNRR monitors its hedging positions and credit ratings of its counterparties
and does not anticipate losses due to counterparty nonperformance.
LABOR
In December 1994, BNRR reached an agreement with the Railroad Yardmasters
Division (Yardmasters) of the United Transportation Union (UTU) which is
effective through 1999 with respect to wages, work rules and all other matters
except health and welfare benefits. Health and welfare issues are being
addressed at the national level and will apply to BNRR's approximately 250
Yardmasters. Effective July 1, 1995, the Yardmasters received a 3 percent
base wage increase under the agreement.
Labor agreements currently in effect for unions other than the Yardmasters
include provisions which prohibited the parties from serving notices to change
wages, benefits, rules and working conditions prior to November 1, 1994. BNRR
joined with the other railroads to negotiate with the unions on a
multi-employer basis on November 1, 1994. At that time, all unions were
served proposals for productivity improvements as well as other changes.
Thereafter, unions also served notices on the railroads which proposed not
only increasing wages and benefits but also restoring many of the restrictive
work rules and practices that were modified or eliminated under the current
agreements. A number of the unions are also challenging the railroads' right
to negotiate on a multi-employer basis and the issue is currently pending in
the federal district court in Washington, D.C.
At this time, the railroads and most of the unions are proceeding in direct
negotiations on the proposals with many in mediation. The National Mediation
Board has scheduled meetings with the parties. The ultimate outcome of the
negotiations cannot be predicted.
Under labor agreements currently in effect for most of the unionized work
force, a cost of living allowance of 9 cents per hour went into effect on July
1, 1995 as new agreements were not reached with those parties prior to that
time. The cost of living allowance was dependent upon changes in the Consumer
Price Index not to exceed three percent.
Notices have been served and negotiations are ongoing with the Brotherhood of
Locomotive Engineers, UTU and the carmen unions to reach merger implementing
agreements under Article I Section 4 of the New York Dock conditions
involving changes in operations between BNRR and ATSF. Discussions with the
Transportation Communications Union involving the railroads' clerical
employees are also continuing.
BNRR is party to service interruption insurance agreements under which BNRR
would be required to pay premiums of up to a maximum of approximately $70
million in the event of work stoppages on other railroads related to ongoing
national bargaining. BNRR is also entitled to receive payments under certain
conditions if a work stoppage occurs on its property.
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ENVIRONMENTAL PROCEEDINGS
United States v. Burlington Northern Railroad Company (BNRR)
On May 25, 1994, the United States Department of Justice (Department) filed
suit on behalf of the United States Environmental Protection Agency (EPA)
against BNRR in United States District Court for the Eastern District of
Wisconsin for the release of oil and hazardous substances into navigable
waters of the United States in the course of three derailments. Specifically
referenced are (1) the alleged release of hazardous substances into the
Nemadji River and its shoreline near Superior, Wisconsin, on June 20, 1992,
(2) the alleged release of oil into the North Platte River and its shoreline
near Guernsey, Wyoming, on January 9, 1993, and (3) the alleged release of oil
into a tributary of the Bighorn River near Worland, Wyoming, on May 6, 1993.
The suit claims that pursuant to 33 U.S.C. Section 1321(b)(7), BNRR is liable
to the United States for civil penalties of up to $25,000 per day of violation
or $1,000 per barrel of oil or per reportable quantity of each hazardous
substance discharged. The EPA initially calculated the statutory maximum
penalty associated with these three spills to be $10,137,000. BNRR answered
the complaint and opposed the penalties sought by the EPA.
In February 1995, BNRR and the EPA settled the case. Pursuant to the
compromise, BNRR agreed to pay $1,500,000 to satisfy all claims by the United
States for fines, penalties, response costs and natural resource damages.
BNRR also agreed to make a $100,000 contribution to a study (jointly approved
by BNRR and the Department) regarding methods or procedures to improve rail
safety and prevent derailments. In return for these payments, the United
States will release BNRR from all claims arising out of the three derailments
and provide BNRR contribution protection against claims by other responsible
parties who may later be pursued by the government for their liability arising
from the derailments.
A consent decree confirming the settlement was approved by the court on July
17, 1995. The cash payments were made by BNRR prior to August 17, 1995, and
this matter is now considered terminated.
State of Wisconsin v. BNRR
By letter dated August 31, 1995, the Wisconsin Department of Justice, on
behalf of the State of Wisconsin (State) notified BNRR of its intent to file a
complaint by the end of September 1995 seeking penalties of $200 per day, a
penalty assessment, and an environmental assessment for BNRR's alleged
failure, for 964 days, to submit a remedial action plan for the Ashland
Railyard, Ashland, Wisconsin, by May 7, 1993, as established by the Wisconsin
Department of Natural Resources. BNRR undertook groundwater monitoring and
removed and disposed of all former railroad structures on the property, but
because of the existence of contamination from offsite and upgradient sources,
did not believe that it would be prudent or technically reasonable to
accomplish site remediation until all upgradient and contributing sources were
properly considered. The property had been leased for many years to another
railroad which operated the railyard facility. It is possible that this
matter may result in monetary sanctions of $100,000 or more.
ICC MERGER CASE
On October 13, 1994, Burlington Northern Inc. (BNI), BNRR, Santa Fe Pacific
Corporation (SFP), and The Atchison, Topeka and Santa Fe Railway Company
(ATSF) (Applicants) filed a railroad merger and control application with the
Interstate Commerce Commission (ICC), Finance Docket No. 32549, Burlington
Northern Inc. and Burlington Northern Railroad Company--Control and
Merger--Santa Fe Pacific Corporation and The Atchison, Topeka and Santa Fe
Railway Company. Applicants sought an order, pursuant to 49 U.S.C. Sections
11343-11347 (1988), approving and authorizing BNI's acquisition of control of
and merger with SFP, the resulting common control of BNRR and ATSF by the
merged company, the consolidation of BNRR and ATSF by the merged company, the
consolidation of BNRR and ATSF operations, and the merger of BNRR and ATSF.
The ICC approved the Merger in its written decision served August 23, 1995,
which decision was effective as of September 22, 1995. Petitions for
reconsideration or to reopen the ICC's decision were filed by five parties to
that proceeding. The ICC has denied two of those petitions, and three of the
petitions remain pending before the ICC. Additionally, six parties to the
proceeding have filed Petitions for Review of the ICC's approval decision with
the United States Court of Appeals for the District of Columbia, which
petitions are now pending before that court. Each of the petitions for
reconsideration or to reopen and for review challenges various aspects of the
ICC's decision, including the extent of conditions imposed on its approval.
None of these petitions is expected to affect materially the benefits to be
realized by the transaction.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
See Index to Exhibits on page E-1 for a description of the exhibits filed as
part of this report.
B. Reports on Form 8-K
During the period, registrant filed a Current Report on Form 8-K (date of
earliest event reported: September 22, 1995) reporting under Item 2, the
consummation of the business combination between Burlington Northern Inc. and
Santa Fe Pacific Corporation effective September 22, 1995 pursuant to which
each became a direct or indirect wholly-owned subsidiary of a new
publicly-held company, Burlington Northern Santa Fe Corporation, and
including, under Item 7, historical financial statements for BNI and SFP.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGTON NORTHERN INC.
(Registrant)
By: /s/ Thomas N. Hund
Thomas N. Hund
Vice President and Controller
(On behalf the Registrant and as
principal accounting officer)
Schaumburg, Illinois
November 13, 1995
<PAGE>
BURLINGTON NORTHERN INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Nature of Exhibit
3.1 Amended and Restated Certificate of Incorporation of BNI
(amended as of September 11, 1995)
3.2 By-laws of BNI
4 Certificate of Designation of 6 1/4% Cumulative Convertible
Preferred Stock, Series A, $.01 par value, of BNI
27 Financial Data Schedule
E-1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BURLINGTON NORTHERN INC.
* * * * *
FIRST: The name of the Corporation is Burlington Northern Inc.
SECOND: The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended ("Delaware Law").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 101,900,000 shares of which 6,900,000 shares
shall be preferred stock, $0.01 par value (hereinafter referred to as the
"$0.01 Par Value Preferred Stock"), and 95,000,000 shares shall be common
stock, $1.00 par value.
SECTION I. PROVISIONS RELATING TO $0.01 PAR VALUE PREFERRED STOCK
Part A. Authorization of Series of $0.01 Par Value Preferred Stock.
1. The Board of Directors is expressly authorized to adopt, from
time to time, a resolution or resolutions providing for the issue of $0.01 Par
Value Preferred Stock in one or more series to fix the number of shares in
each such series and to fix the designations and the powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations and restrictions, of each such series. The
authority of the Board of Directors with respect to each such series shall
include determination of the following (which may vary as between the
different series of $0.01 Par Value Preferred Stock):
(a) The number of shares constituting the series and the
distinctive designation of the series;
(b) The dividend rate on the shares of the series and the
extent, if any, to which dividends thereon shall be cumulative;
(c) Whether shares of the series shall be redeemable and, if
redeemable, the redemption price payable on redemption thereof, which price
may, but need not, vary according to the time or circumstances of such
redemption;
(d) The amount or amounts payable upon the shares of the series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation prior to any payment or distribution of the assets of
the Corporation to any class or classes of stock of the Corporation ranking
junior to the Preferred Stock, provided, however, that the aggregate amount
payable upon the shares of all series of $0.01 Par Value Preferred Stock upon
voluntary or involuntary liquidation shall not exceed $500,000,000;
(e) Whether the shares of the series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of shares of the series and, if so entitled, the amount of such
fund and the manner of its application, including the price or prices at
which the shares may be redeemed or purchased through the application of such
fund;
(f) Whether the shares of the series shall be convertible into,
or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Corporation
and, if so convertible or exchangeable, the conversion price or prices, or
the rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of
such conversion or exchange;
(g) The extent, if any, to which the holders of shares of the
series shall be entitled to vote on any question or in any proceedings or to
be represented at or to receive notice of any meeting of stockholders of the
Corporation; and
(h) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable, which shall not affect adversely any other class or series of
Preferred Stock at the time outstanding and which shall not be inconsistent
with the provisions of this certificate of incorporation.
Part B. Provisions Applicable to All Series of $0.01 Par Value Preferred
Stock.
1. (a) Except as otherwise specifically provided by the laws
of the State of Delaware or by this certificate of incorporation or by the
resolution of the Board of Directors creating any series of $0.01 Par Value
Preferred Stock, the holders of the $0.01 Par Value Preferred Stock shall not
be entitled to vote on any question or in any proceedings or to be represented
at or to receive notice of any meeting of stockholders of the Corporation;
provided, however, that whenever accrued dividends on any series of the $0.01
Par Value Preferred Stock shall not be paid in an aggregate amount equivalent
to six full quarterly dividends, the holders of the shares of such series
shall have the special right, voting together with the holders of any other
series of the $0.01 Par Value Preferred Stock, if they shall then have such
right, as a single class separately from the holders of any other class of
stock of the Corporation, to elect at the next annual meeting of the
stockholders of the Corporation two directors of the corporation, and the
remaining directors shall be elected by the other class, classes or series of
stock entitled to vote therefor. Such right of election shall continue until
such time as all dividends on the shares of the series having such right
accrued to the date of payment, if the date of payment shall be a quarterly
dividend payment date, or to the last preceding quarterly dividend payment
date, if the date of payment shall be other than a quarterly dividend payment
date, shall have been paid in full, or declared and set apart for payment, at
which time such right of election shall terminate, subject to revesting in the
event of each and every subsequent failure to pay in an aggregate amount
equivalent to six full quarterly dividends. In the exercise of the special
voting rights provided in this paragraph 1, the holders of shares shall have
one vote per share. Nothing herein contained shall in any way restrict the
power of the Board of Directors to increase or decrease the number of
directors in accordance with the laws of the State of Delaware, this
certificate of incorporation and the By-Laws of the Corporation.
(b) At any annual meeting of stockholders at which holders of
any series of the $0.01 Par Value Preferred Stock shall have the right of
election provided in this paragraph 1, the presence, in person or by proxy, of
the holders of a majority of the shares of $0.01 Par Value Preferred Stock
entitled to participate in such election shall be required to constitute a
quorum of such shares for the election of any director by the holders of such
shares. At any such meeting or adjournment thereof, (i) the absence of a
quorum of such shares of $0.01 Par Value Preferred Stock shall not prevent the
election of the directors to be elected by the other class, classes or series
of stock entitled to vote therefor, and the absence of a quorum of such other
class, classes or series of stock shall not prevent the election of the
directors to be elected by such shares of $0.01 Par Value Preferred Stock, and
(ii) in the absence of either or both such quorums, a majority of the holders
present in person or by proxy of the class, classes or series of stock which
lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
(c) The directors elected by the holders of shares of $0.01 Par
Value Preferred Stock in exercise of the right of election provided in this
paragraph 1 shall continue in office until their successors shall have been
elected by such holders or until termination of such right of election. The
vacancies in the Board of Directors so occurring upon the termination of such
right of election shall be filled by the majority vote of the remaining
directors. Any vacancies in the Board of Directors occurring during any
period when the holders of shares of $0.01 Par Value Preferred Stock have such
right of election shall be filled only by vote of a majority (even if that be
only a single director) of the remaining directors theretofore elected by the
holders of the class, classes or series of stock which elected the director
whose office shall have become vacant.
2. Except as otherwise specifically provided with respect to any
series of $0.01 Par Value Preferred Stock, so long as any of the $0.01 Par
Value Preferred Stock is outstanding, the Corporation will not:
(a) declare or pay, or set apart for payment, any dividends
(other than dividends payable in shares of stock of the Corporation ranking
junior to the $0.01 Par Value Preferred Stock, both as to dividends and upon
liquidation) or make any distribution, on any class or classes of stock of
the Corporation ranking junior to the $0.01 Par Value Preferred Stock either
as to dividends or upon liquidation, and will not redeem, purchase or
otherwise acquire, whether voluntarily, for a mandatory or optional sinking
or retirement fund or otherwise, or permit any subsidiary to purchase or
otherwise acquire, any shares of any such junior class if at the time of
making such declaration, payment, distribution, redemption, purchase or
acquisition the Corporation shall not have paid, or declared and set apart
for payment, all dividends accrued on the $0.01 Par Value Preferred Stock to
the date of such declaration, payment, distribution, redemption, purchase or
acquisition, if such date shall be a quarterly dividend payment date, or to
the last preceding quarterly dividend payment date, if such date shall be
other than a quarterly dividend payment date, or shall not have redeemed, or
set aside funds necessary for the redemption of, any shares of $0.01 Par
Value Preferred Stock required to be redeemed pursuant to this certificate of
incorporation or the resolution or resolutions of the Board of Directors
creating any series of $0.01 Par Value Preferred Stock; provided, however,
that the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior class in exchange for, or out of the net cash
proceeds from the substantially concurrent sale of, shares of any class of
stock of the Corporation ranking junior to the $0.01 Par Value Preferred
Stock both as to dividends and upon liquidation;
(b) without the affirmative vote or consent of the holders of at
least 66 2/3% of all the $0.01 Par Value Preferred Stock at the time
outstanding, voting together as a single class separate from the holders of
any other class of stock of the Coporation, given in person or by proxy,
either in writing or by resolution adopted at a special meeting called for
the purpose, (i) create any other class or classes of stock ranking prior to
the $0.01 Par Value Preferred Stock, either as to dividends or upon
liquidation, or increase the authorized number of shares of any such other
class of stock or (ii) amend, alter or repeal any of the provisions of this
Article so as to affect adversely the preferences, special rights or powers
of the $0.01 Par Value Preferred Stock; provided, however, that if such
amendment, alteration or repeal affects adversely the preferences, special
rights or powers of one or more but not all series of $0.01 Par Value
Preferred Stock at the time outstanding, only the affirmative vote or consent
of at least 66 2/3% of the number of shares at the time outstanding of the
series so affected shall be required; and provided, further, that no vote or
consent of the $0.01 Par Value Preferred Stock shall be required to increase
the authorized amount of the $0.01 Par Value Preferred Stock or for the
creation of one or more classes of preferred stock so long as such class or
classes do not rank prior to the $0.01 Par Value Preferred Stock, either as
to dividends or upon liquidation;
(c) without the affirmative vote or consent of the holders of at
least a majority of all the $0.01 Par Value Preferred Stock at the time
outstanding, voting together as a single class separately from the holders of
any other class of stock of the Corporation, given in person or by proxy,
either in writing or by resolution adopted at a special meeting called for
the purpose, voluntarily dissolve, liquidate or wind up.
FIFTH: The name and mailing address of the incorporator are:
Name Mailing Address
Frank S. Farrell 176 East Fifth Street
St. Paul, Minnesota 55101
SIXTH: The Board of Directors shall have the power to adopt,
amend or repeal the bylaws of the Corporation.
SEVENTH: Election of directors need not be by written ballot
unless the bylaws of the Corporation so provide.
EIGHTH: (1) A director of the Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by Delaware Law.
(2)(a) Each person (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or
is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, shall be indemnified and held harmless by the Corporation
to the fullest extent permitted by Delaware Law. The right to indemnification
conferred in this ARTICLE EIGHTH shall also include the right to be paid by
the Corporation the expenses incurred in connection with any such proceeding
in advance of its final disposition to the fullest extent permitted by
Delaware Law. The right to indemnification conferred in this ARTICLE EIGHTH
shall be a contract right.
(b) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the directors, officers, employees and
agents of the Corporation to such extent and to such effect as the Board of
Directors shall determine to be appropriate and authorized by Delaware Law.
(3) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss incurred by such person in any such capacity or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under Delaware Law.
(4) The rights and authority conferred in this ARTICLE EIGHTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire.
(5) Neither the amendment nor repeal of this ARTICLE EIGHTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws
of the Corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE
EIGHTH in respect of any acts or omissions occurring prior to such amendment,
repeal, adoption or modification.
NINTH: The Corporation reserves the right to amend this
Certificate of Incorporation in any manner permitted by Delaware Law and, with
the sole exception of those rights and powers conferred under the above
ARTICLE EIGHTH, all rights and powers conferred herein on stockholders,
directors and officers, if any, are subject to this reserved power.
Exhibit 3.2
BYLAWS
OF
BURLINGTON NORTHERN INC.
* * * * *
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
Section 3. Books. The books of the Corporation may be kept
within or without of the State of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of
stockholders shall be held at such place, either within or without the State
of Delaware, on such date and at such time as may be determined from time to
time by the Board of Directors (or the Chairman in the absence of a
designation by the Board of Directors).
Section 2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1996, shall be held to elect the Board of Directors
and transact such other business as may properly be brought before the
meeting.
Section 3. Special Meetings. Special meetings of stockholders
may be called by the Board of Directors or the chairman of the Board and shall
be called by the Secretary at the request in writing of holders of record of a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Section 4. Notice of Meetings and Adjourned Meetings; Waivers of
Notice. (a) Whenever stockholders are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given which
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended ("Delaware Law"), such
notice shall be given not less than 10 nor more than 60 days before the date
of the meeting to each stockholder of record entitled to vote at such meeting.
Unless these bylaws otherwise require, when a meeting is adjourned to another
time or place (whether or not a quorum is present), notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 30 days, or after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(b) A written waiver of any such notice signed by the person
entitled thereto, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 5. Quorum. Unless otherwise provided under the
certificate of incorporation or these bylaws and subject to Delaware Law, the
presence, in person or by proxy, of the holders of a majority of the
outstanding capital stock of the Corporation entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business.
Section 6. Voting. (a) Unless otherwise provided in the
certificate of incorporation and subject to Delaware Law, each stockholder
shall be entitled to one vote for each outstanding share of capital stock of
the Corporation held by such stockholder. Unless otherwise provided in
Delaware Law, the certificate of incorporation or these bylaws, the
affirmative vote of a majority of the shares of capital stock of the
Corporation present, in person or by proxy, at a meeting of stockholders and
entitled to vote on the subject matter shall be the act of the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to a corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period.
Section 7. Action by Consent. (a) Unless otherwise provided in
the certificate of incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding capital stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to the Corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective
to take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation by delivery
to its registered office in Delaware, its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Section 8. Organization. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, (or in his or her
absence or if one shall not have been elected, the President) shall act as
chairman of the meeting. The Secretary (or in his or her absence or inability
to act, the person whom the chairman of the meeting shall appoint secretary of
the meeting) shall act as secretary of the meeting and keep the minutes
thereof.
Section 9. Order of Business. The order of business at all
meetings of stockholders shall be as determined by the chairman of the
meeting.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as otherwise provided in
Delaware Law or the certificate of incorporation, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors.
Section 2. Number, Election and Term of Office. The number of
directors which shall constitute the whole Board shall be fixed from time to
time by resolution of the Board of Directors but shall not be less than three
nor more than nine. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 12 of this Article III, and
each director so elected shall hold office until his or her successor is
elected and qualified or until his or her earlier death, resignation or
removal. Directors need not be stockholders.
Section 3. Quorum and Manner of Acting. Unless the certificate
of incorporation or these bylaws require a greater number, a majority of the
total number of directors shall constitute a quorum for the transaction of
business, and the affirmative vote of a majority of the directors present at
meeting at which a quorum is present shall be the act of the Board of
Directors. When a meeting is adjourned to another time or place (whether or
not a quorum is present), notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Board of Directors may
transact any business which might have been transacted at the original
meeting. If a quorum shall not be present at any meeting of the Board of
directors the directors present thereat may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 4. Time and Place of Meetings. The Board of Directors
shall hold its meetings at such place, either within or without the State of
Delaware, and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a determination by the Board
of Directors).
Section 5. Annual Meeting. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors
may be held at such place either within or without the State of Delaware, on
such date and at such time as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this Article III or in a waiver of notice
thereof signed by any director who chooses to waive the requirement of notice.
Section 6. Regular Meetings. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice
thereof shall have been once given to each member of the Board of Directors,
regular meetings may be held without further notice being given.
Section 7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President and
shall be called by the Chairman of the Board, President or Secretary on the
written request of three directors. Notice of special meetings of the Board
of Directors shall be given to each director at least three days before the
date of the meeting in such manner as is determined by the Board of Directors.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
the bylaws of the Corporation; and unless the resolution of the Board of
Directors or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 9. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 10. Telephonic Meetings. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 11. Resignation. Any director may resign at any time by
giving written notice to the Board of Directors or to the Secretary of the
Corporation. The resignation of any director shall take effect upon receipt
of notice thereof or at such later time as shall be specified in such notice;
and unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 12. Vacancies. Unless otherwise provided in the
certificate of incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by
all the stockholders having the right to vote as a single class may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. Whenever the holders of any class or classes
of stock or series thereof are entitled to elect one or more directors by the
certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of directors
elected by such class or classes or series thereof then in office, or by a
sole remaining director so elected. Each director so chosen shall hold office
until his or her successor is elected and qualified, or until his or her
earlier death, resignation or removal. If there are no directors in office,
then an election of directors may be held in accordance with Delaware Law.
Unless otherwise provided in the certificate of incorporation, when one or
more directors shall resign from the Board, effective at a future date, a
majority of the directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in the
filling of other vacancies.
Section 13. Removal. Any director or the entire Board of
Directors may be removed, with or without cause, at any time by the
affirmative vote of the holders of a majority of the outstanding capital stock
of the Corporation entitled to vote and the vacancies thus created may be
filled in accordance with Section 12 of this Article III.
Section l4. Compensation. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall
have authority to fix the compensation of directors, including fees and
reimbursement of expenses.
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Principal Officers. The principal officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and
a Secretary who shall have the duty, among other things, to record the
proceedings of the meetings of stockholders and directors in a book kept for
that purpose. The Corporation may also have such other principal officers,
including one or more Controllers, as the Board may in its discretion appoint.
One person may hold the offices and perform the duties of any two or more of
said offices, except that no one person shall hold the offices and perform the
duties of President and Secretary.
Section 2. Election, Term of Office and Remuneration. The
principal officers of the Corporation shall be elected annually by the Board
of Directors at the annual meeting thereof. Each such officer shall hold
office until his or her successor is elected and qualified, or until his or
her earlier death, resignation or removal. The remuneration of all officers
of the Corporation shall be fixed by the Board of Directors. Any vacancy in
any office shall be filled in such manner as the Board of Directors shall
determine.
Section 3. Subordinate Officers. In addition to the principal
officers enumerated in Section 1 of this Article IV, the Corporation may have
one or more Assistant Treasurers, Assistant Secretaries and Assistant
Controllers and such other subordinate officers, agents and employees as the
Board of Directors may deem necessary, each of whom shall hold office for such
period as the Board of Directors may from time to time determine. The Board
of Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents or employees.
Section 4. Removal. Except as otherwise permitted with respect
to subordinate officers, any officer may be removed, with or without cause, at
any time, by resolution adopted by the Board of Directors.
Section 5. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall
take effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 6. Powers and Duties. The officers of the Corporation
shall have such powers and perform such duties incident to each of their
respective offices and such other duties as may from time to time be conferred
upon or assigned to them by the Board of Directors.
ARTICLE V
GENERAL PROVISIONS
Section 1. Fixing the Record Date. (a) In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which record date shall not be more than 60 nor less than 10 days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided that the Board of Directors may fix a
new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than 10 days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by Delaware Law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by Delaware Law, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 2. Dividends. Subject to limitations contained in
Delaware Law and the certificate of incorporation, the Board of Directors may
declare and pay dividends upon the shares of capital stock of the Corporation,
which dividends may be paid either in cash, in property or in shares of the
capital stock of the Corporation.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
commence on January 1 and end on December 31 of each year.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 5. Amendments. These bylaws or any of them, may be
altered, amended or repealed, or new bylaws may be made, by the stockholders
entitled to vote thereon at any annual or special meeting thereof or by the
Board of Directors.
Exhibit 4
CERTIFICATE OF DESIGNATION
OF
6 1/4% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES A, $0.01 PAR VALUE
OF
BURLINGTON NORTHERN INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
BURLINGTON NORTHERN INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), and pursuant to resolutions adopted by this
Board of Directors on September 22, 1995, there hereby is created, out of the
6,900,000 shares of Preferred Stock, $0.01 par value, of the Corporation
authorized in Article Fourth of the Certificate of Incorporation (the
"Preferred Stock"), a series of the Preferred Stock consisting of 6,900,000
shares, which series shall have the following powers, designations,
preferences, and relative, participating, optional, or other rights, and the
following qualifications limitations, and restrictions (in addition to the
powers, designations, preferences, and relative, participating, optional, or
other rights, and the qualifications, limitations, and restrictions, set forth
in the Certificate of Incorporation which are applicable to preferred stock
and/or to the Preferred Stock):
SECTION 1. DESIGNATION OF AMOUNT. The shares of such series
shall be designated as "6 1/4% Cumulative Convertible Preferred Stock, Series
A, $0.01 Par Value" (the "6 1/4% Preferred Stock"), and the authorized number
of shares constituting such series shall be 6,900,000. The 6 1/4% Preferred
Stock shall be $0.01 par value stock.
<PAGE>
SECTION 2. DIVIDENDS.
(a) The holders of shares of the 6 1/4% Preferred Stock will be
entitled to receive when, as, and if declared by the Board of Directors out of
funds of the Corporation legally available therefor, cumulative cash dividends
on the shares of the 6 1/4% Preferred Stock at the rate of $3.125 per annum
per share of 6 1/4% Preferred Stock, AND NO MORE, payable in arrears in equal
quarterly installments on January 1, April 1, July 1, and October 1 of each
year, commencing on October 1, 1995. Such dividends shall be cumulative from
the date of original issuance of any shares of the 6 1/4% Preferred Stock.
Each such dividend shall be paid to the holders of record of the shares of the
6 1/4% Preferred Stock as they appear on the stock register of the Corporation
on such record date, which shall be not more than 30 days nor less than 10
days preceding the dividend payment date thereof, as shall be fixed by the
Board of Directors or a duly authorized committee thereof. If a holder
converts a share or shares of the 6 1/4% Preferred Stock after the close of
business on the record date for a dividend and before the opening of business
on the payment date for such dividend (except for a share or shares called for
redemption on a Redemption Date (as defined in Section 3(c) hereof) during the
period from the close of business on any dividend payment record date to the
close of business on the corresponding dividend payment date), then, pursuant
to Section 6 hereof, the holder will be required to pay to the Corporation at
the time of such conversion the amount of such dividend.
(b) If dividends are not paid in full, or declared in full, and
sums set apart for the payment thereof, upon the shares of the 6 1/4%
Preferred Stock and shares of any other preferred stock ranking on a parity as
to dividends with the 6 1/4% Preferred Stock, all dividends declared upon
shares of the 6 1/4% Preferred Stock, and of any other preferred stock ranking
on a parity as to dividends, shall be paid or declared pro rata so that in all
cases the amount of dividends paid or declared per share on the 6 1/4%
Preferred Stock, and such other preferred stock, shall bear to each other the
same ratio that accumulated dividends per share, including dividends accrued
or in arrears, if any, on the shares of the 6 1/4% Preferred Stock, and such
other preferred stock, bear to each other. Except as provided in the
preceding sentence, unless full cumulative dividends on the shares of the 6
1/4% Preferred Stock have been paid or declared in full and sums set aside for
the payment thereof, no dividends (other than dividends in shares of, or
options, warrants, or rights to subscribe for or purchase shares of the Common
Stock (as hereinafter defined) or in shares of any other capital stock of the
Corporation ranking junior to the 6 1/4% Preferred Stock as to dividends)
shall be paid or declared and set aside for payment or other distribution made
upon the Corporation's Common Stock, $1.00 par value (the "Common Stock"), or,
except as provided above, on any other capital stock of the Corporation
ranking junior to or on a parity with the 6 1/4% Preferred Stock as to
dividends, nor shall any shares of the Common Stock or shares of any other
capital stock of the Corporation ranking junior to or on a parity with the 6
1/4% Preferred Stock as to dividends be redeemed, purchased, or otherwise
acquired for any consideration (or any payment made to or available for a
sinking fund for the redemption of any such shares) by the Corporation or any
subsidiary of the Corporation (except by conversion into or exchange for
shares of capital stock of the Corporation ranking junior to the 6 1/4%
Preferred Stock as to dividends). Holders of shares of the 6 1/4% Preferred
Stock shall not be entitled to any dividends, whether payable in cash,
property, or shares of capital stock, in excess of full accrued and cumulative
dividends as herein provided. No interest or sum of money in lieu of interest
shall be payable in respect of any dividend payment or payments on the shares
of the 6 1/4% Preferred Stock that may be in arrears.
The terms "accrued dividends," "dividends accrued," and "dividends
in arrears," whenever used herein with reference to shares of preferred stock
shall be deemed to mean an amount which shall be equal to dividends thereon at
the annual dividend rates per share for the respective series from the date or
dates on which such dividends commence to accrue to the end of the then
current quarterly dividend period for such preferred stock (or, in the case of
redemption, to the date of redemption), less the amount of all dividends paid,
or declared in full and sums set aside for the payment thereof, upon such
shares of preferred stock.
(c) Dividends payable on the shares of the 6 1/4% Preferred Stock
for any period less than a full quarterly dividend period shall be computed on
the basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in the period for which payable. Any dividend otherwise payable
on a date which is not a business day will be paid on the next day which is a
business day, but without interest.
SECTION 3. OPTIONAL REDEMPTION.
(a) The shares of the 6 1/4% Preferred Stock will be redeemable at
the option of the Corporation by resolution of its Board of Directors, in
whole, or, from time to time, in part, at any time on or after December 26,
1995, at the following redemption prices per share, if redeemed during the
twelve-month period beginning November 24 of the year indicated below, plus,
in each case, all dividends accrued and unpaid on the shares of the 6 1/4%
Preferred Stock up to the date fixed for the redemption, upon giving notice as
provided hereinbelow:
<TABLE>
<CAPTION>
<C> <S>
Price
--------
1,995 52.1875
1,996 51.88
1,997 51.56
1,998 51.25
1,999 50.94
2,000 50.63
2,001 50.31
2002 and thereafter 50
</TABLE>
(b) If fewer than all of the outstanding shares of the 6 1/4%
Preferred Stock are to be redeemed, the number of shares to be redeemed shall
be determined by the Board of Directors and the shares to be redeemed shall be
determined pro rata or by lot or in such other manner and subject to such
regulations as the Board of Directors in its sole discretion shall prescribe.
(c) At least 30 days, but not more than 60 days, prior to the date
fixed for the redemption of shares of the 6 1/4% Preferred Stock, a written
notice shall be mailed in a postage prepaid envelope to each holder of record
of the shares of 6 1/4% Preferred Stock to be redeemed, addressed to such
holder at his post office address as shown on the records of the Corporation,
notifying such holder of the election of the Corporation to redeem such
shares, stating the date fixed for redemption thereof (the "Redemption Date"),
and calling upon such holder to surrender to the Corporation, on the
Redemption Date at the place designated in such notice, his certificate or
certificates representing the number of shares specified in such notice of
redemption. On or after the Redemption Date, each holder of shares of the 6
1/4% Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In case less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
From and after the Redemption Date (unless default shall be made by
the Corporation in payment of the redemption price), all dividends on the
shares of the 6 1/4% Preferred Stock designated for redemption in such notice
shall cease to accrue and all rights of the holders thereof as stockholders of
the Corporation, except the right to receive the redemption price of such
shares (including all accrued and unpaid dividends up to the Redemption Date)
upon the surrender of certificates representing the same, shall cease and
terminate and such shares shall not thereafter be transferred (except with the
consent of the Corporation) on the books of the Corporation, and such shares
shall not be deemed to be outstanding for any purpose whatsoever. At its
election, the Corporation, prior to the Redemption Date, may deposit the
redemption price (including all accrued and unpaid dividends up to the
Redemption Date) of shares of the 6 1/4% Preferred Stock so called for
redemption in trust for the holders thereof with a bank or trust company
(having a capital surplus and undivided profits aggregating not less than
$50,000,000) in the Borough of Manhattan, City and State of New York, or in
any other city in which the Corporation at the time shall maintain a transfer
agency with respect to such shares, in which case the aforesaid notice to
holders of shares of the 6 1/4% Preferred Stock to be redeemed shall state the
date of such deposit, shall specify the office of such bank or trust company
as the place of payment of the redemption price, and shall call upon such
holders to surrender the certificates representing such shares at such place
on or after the date fixed in such redemption notice (which shall not be later
than the Redemption Date) against payment of the redemption price (including
all accrued and unpaid dividends up to the Redemption Date). Any interest
accrued on such funds shall be paid to the Corporation from time to time. Any
moneys so deposited which shall remain unclaimed by the holders of such shares
of the 6 1/4% Preferred Stock at the end of two years after the Redemption
Date shall be returned by such bank or trust company to the Corporation.
If a notice of redemption has been given pursuant to this Section 3
and any holder of shares of the 6 1/4% Preferred Stock shall, prior to the
close of business on the last business day preceding the Redemption Date, give
written notice to the Corporation pursuant to Section 6 below of the
conversion of any or all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed
or assigned to the Corporation, and any necessary transfer tax payment, as
required by Section 6 below), then such redemption shall not become effective
as to such shares to be converted, such conversion shall become effective as
provided in Section 6 below, and any moneys set aside by the Corporation for
the redemption of such shares of converted 6 1/4% Preferred Stock shall
revert to the general funds of the Corporation.
(d) Shares of the 6 1/4% Preferred Stock redeemed, repurchased,
retired, or otherwise acquired by the Corporation (whether pursuant to the
provisions of Section 3 or otherwise), or surrendered to the Corporation upon
conversion, or which were not originally issued as part of a contemplated
public offering of such 6 1/4% Preferred Stock, shall cease to be shares of
the 6 1/4% Preferred Stock and shall thereupon be retired and may not be
reissued as shares of the 6 1/4% Preferred Stock, but shall thereafter have
the status of authorized but unissued shares of the Preferred Stock, without
designation as to series, until such shares are once more designated as part
of a particular series of the Preferred Stock by the Board of Directors.
SECTION 4. VOTING RIGHTS.
(a) Except as otherwise set forth hereafter, or by the laws of the
State of Delaware specifically provided, the holders of shares of the 6 1/4%
Preferred Stock shall not be entitled to vote on any question or matter, or in
any proceedings, or to be represented at or to receive notice of any meeting
of stockholders of the Corporation; provided, however, that the holders of the
6 1/4% Preferred Stock will have voting rights as provided in this Section 4
and in Section 8 hereof. When the holders of the 6 1/4% Preferred Stock vote
on any matter as members of a class which does not include the holders of
Common Stock, the holders of 6 1/4% Preferred Stock shall be entitled to an
aggregate number of votes which is in the same proportion to the total number
of class votes as the aggregate liquidation preference of the outstanding
shares of 6 1/4% Preferred Stock bears to the aggregate liquidation
preference of all shares of capital stock in the class; and each holder of 6
1/4% Preferred Stock shall be entitled to his or her proportionate share of
the aggregate number of votes to which the holders of 6 1/4% Preferred Stock
are entitled.
(b) In the event that the Corporation shall have failed to declare
and pay or set apart for payment in full the dividends accumulated on the
outstanding shares of the 6 1/4% Preferred Stock for any six quarterly
dividend payment periods, whether or not consecutive (a "Preferential Dividend
Non-Payment"), the number of directors of the Corporation shall be increased
by two and the holders of outstanding shares of the 6 1/4% Preferred Stock,
voting together as a class with all other series of Preferred Stock of the
Corporation ranking on a parity with the 6 1/4% Preferred Stock with respect
to dividends or distribution of assets upon liquidation and then entitled to
vote on the election of such additional directors, shall be entitled to elect,
as a single class separately from the holders of any other class of capital
stock of the Corporation, two additional directors until the full dividends
accumulated on all outstanding shares of the 6 1/4% Preferred Stock have been
declared and paid or set apart for payment. Upon the occurrence of a
Preferential Dividend Non-Payment, the Board of Directors shall, within a
reasonable period, call a special meeting of the holders of shares of the 6
1/4% Preferred Stock and all holders of other classes or series of preferred
stock of the Corporation ranking on a parity with the 6 1/4% Preferred Stock
with respect to the payment of dividends or distribution of assets upon
liquidation who are then entitled to vote on the election of such additional
directors for the purpose of electing the additional directors provided by the
foregoing provisions. If and when all accumulated dividends on the shares of
the 6 1/4% Preferred Stock have been declared and paid or set aside for
payment in full, the holders of shares of the 6 1/4% Preferred Stock shall be
divested of the special voting rights provided by this Section 4(b), subject
to revesting in the event of each and every subsequent Preferential Dividend
Non-Payment. Upon termination of such special voting rights attributable to
all holders of shares of the 6 1/4% Preferred Stock and shares of any other
class or series of preferred stock of the Corporation ranking on a parity with
the 6 1/4% Preferred Stock with respect to payment of dividends or
distribution of assets upon liquidation, the term of office of each Director
elected by the holders of shares of the 6 1/4% Preferred Stock and such
parity Preferred Stock (a "Preferred Stock Director") pursuant to such special
voting rights shall forthwith terminate and the number of directors
constituting the entire Board of Directors shall be reduced by the number of
Preferred Stock Directors. Any Preferred Stock Director may be removed by,
and shall not be removed otherwise than by, the vote of the holders of record
of a majority of the outstanding shares of the 6 1/4% Preferred Stock and all
other series of Preferred Stock ranking on a parity with the 6 1/4% Preferred
Stock with respect to the payment of dividends or distribution of assets upon
liquidation who were entitled to vote in such Preferred Stock Director's
election, voting as a separate class, at a meeting called for such purpose.
(c) So long as any shares of this Series are outstanding, the
bylaws of the Corporation shall contain provisions ensuring that the number of
Directors constituting the entire Board of Directors of the Corporation shall
at all times be such that the exercise, by the holders of shares of the 6
1/4% Preferred Stock and the holders of parity Preferred Stock, of the right
to elect Directors under the circumstances provided for in subclause (a) of
this Section 4 will not contravene any provision of this Certificate of
Incorporation restricting the number of Directors which may constitute the
entire Board of Directors of the Corporation.
(d) Directors elected pursuant to subclause (b) of this Section 4
shall serve until the earlier of (1) the next annual meeting of the
stockholders of the Corporation and the election (by the holders of shares of
the 6 1/4% Preferred Stock and the holders of parity Preferred Stock) and
qualification of their respective successors, or (2) the date upon which all
dividends in default on the shares of the 6 1/4% Preferred Stock and such
other parity Preferred Stock shall have been paid in full.
(e) So long as a Preferential Dividend Non-Payment shall continue,
any vacancy in the office of a Preferred Stock Director may be filled by
written consent of the Preferred Stock Director remaining in office or, if
none remain in office, by vote of the holders of record of a majority of the
outstanding shares of the 6 1/4% Preferred Stock and all other series of
Preferred Stock ranking on a parity with the 6 1/4% Preferred Stock with
respect to the payment of dividends or distribution of assets upon liquidation
who are then entitled to vote in the election of such Preferred Stock
Directors as provided above. As long as the Preferential Dividend Non-Payment
shall continue, holders of shares of the 6 1/4% Preferred Stock shall not, as
such stockholders, be entitled to vote on the election or removal of directors
other than Preferred Stock Directors, but shall not be divested of any other
voting rights provided to such stockholders by law with respect to any other
matter to be acted upon by the stockholders of the Corporation.
SECTION 5. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution, or winding up of
the affairs of the Corporation, whether voluntary or otherwise, after payment
or provision for payment of the debts and other liabilities of the
Corporation, the holders of shares or the 6 1/4% Preferred Stock shall be
entitled to receive, in cash, out of the remaining net assets of the
Corporation, the amount of Fifty Dollars ($50.00) for each share of the 6
1/4% Preferred Stock, plus an amount equal to all dividends accrued and unpaid
on each such share up to the date fixed for distribution, AND NO MORE, before
any distribution shall be made to the holders of shares of the Common Stock or
any other capital stock of the Corporation ranking (as to any such
distribution) junior to the 6 1/4% Preferred Stock. If, upon any
liquidation, dissolution, or winding up of the Corporation, the assets
distributable among the holders of shares of the 6 1/4% Preferred Stock and
all other classes and series of preferred stock ranking (as to any such
distribution) on a parity with the 6 1/4% Preferred Stock are insufficient to
permit the payment in full to the holders of all such shares of all
preferential amounts payable to all such holders, then the entire assets of
the Corporation thus distributable shall be distributed ratably among the
holders of the shares of the 6 1/4% Preferred Stock and any such other
classes and series of preferred stock ranking (as to any such distribution) on
a parity with the 6 1/4% Preferred Stock in proportion to the respective
amounts that would be payable per share if such assets were sufficient to
permit payment in full.
(b) For purposes of this Section 5, a distribution of assets in any
dissolution, winding up, or liquidation shall not include (i) any
consolidation or merger of the Corporation with or into any other corporation
or (ii) a sale or other disposition of all or substantially all of the
Corporation's assets to another corporation.
(c) After the payment of the full preferential amounts provided for
herein to the holders of shares of the 6 1/4% Preferred Stock or funds
necessary for such payment have been set aside in trust for the holders
thereof, such holders shall be entitled to no other or further participation
in the distribution of the assets of the Corporation.
SECTION 6. CONVERSION.
(a) Holders of shares of the 6 1/4% Preferred Stock shall have the
right, exercisable at any time and from time to time, except in the case of
shares of the 6 1/4% Preferred Stock called for redemption, to convert all or
any such shares of the 6 1/4% Preferred Stock into such number of whole
shares of the Common Stock as is equal to the aggregate liquidation preference
amount of the shares of 6 1/4% Preferred Stock surrendered for conversion
dividend by the conversion price of $47 per share of such Common Stock
(equivalent to a conversion rate of 1.0638298 shares of the Common Stock for
each share of the 6 1/4% Preferred Stock so converted), subject to adjustment
as described below. In the case of shares of the 6 1/4% Preferred Stock
called for redemption, conversion rights will expire at the close of business
on the day preceding the date fixed for redemption. Notice of an optional
redemption must be mailed not less than 30 days and not more than 60 days
prior to the Redemption Date. Upon conversion, no adjustment or payment will
be made on account of accrued or unpaid dividends, but if any holder
surrenders a share of the 6 1/4% Preferred Stock for conversion after the
close of business on the record date for the payment of a dividend and prior
to the opening of business on the next dividend payment date, then,
notwithstanding such conversion, the dividend payable on such dividend payment
date will be paid to the registered holder of such share of the 6 1/4%
Preferred Stock on such record date. In such event, such share of the 6 1/4%
Preferred Stock, when surrendered for conversion during the period between the
close of business on any dividend payment record date and the opening of
business on the corresponding dividend payment date (except for a share or
shares of the 6 1/4% Preferred Stock called for redemption on a Redemption
Date (as defined in Section 3(c) hereof) during the period from the close of
business on any dividend payment record date to the close of business on the
corresponding dividend payment date), must be accompanied by payment of an
amount equal to the dividend payable on such dividend payment date on the
share so converted. A holder of shares of the 6 1/4% Preferred Stock on a
dividend payment record date who (or whose transferee) converts such shares of
6 1/4% Preferred Stock on a dividend payment date will receive the dividend
payable on such shares of 6 1/4% Preferred Stock by the Corporation on such
dividend payment date, and the converting holder need not include payment in
the amount of such dividend upon surrender of shares of the 6 1/4% Preferred
Stock for conversion on such dividend payment date.
(b) Any holder of a share or shares of the 6 1/4% Preferred Stock
electing to convert such share or shares thereof shall deliver the certificate
or certificates therefor to the principal office of any transfer agent for the
Common Stock, with the form of notice of election to convert as the
Corporation shall prescribe fully completed and duly executed and (if so
required by the Corporation or any conversion agent) accompanied by
instruments of transfer in form satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or his duly
authorized attorney, and transfer taxes, stamps or funds therefor or evidence
of payment thereof if required pursuant to Section 6(a) or 6(d) hereof. The
conversion right with respect to any such shares shall be deemed to have been
exercised at the date upon which the certificates therefor accompanied by such
duly executed notice of election and instruments of transfer and such taxes,
stamps, funds or evidence of payment shall have been so delivered, and the
person or persons entitled to receive the shares of the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of the Common Stock upon said date.
(c) No fractional shares of the Common Stock or scrip representing
fractional shares shall be issued upon conversion of shares of the 6 1/4%
Preferred Stock. If more than one share of the 6 1/4% Preferred Stock shall
be surrendered for conversion at one time by the same holder, the number of
full shares of the Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
the 6 1/4% Preferred Stock so surrendered. Instead of any fractional shares
of the Common Stock which would otherwise be issuable upon conversion of any
shares of the 6 1/4% Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the closing price for the Common Stock on the last trading day preceding
the date of conversion. The closing price for such day shall be the last
reported sales price regular way or, in case no such reported sale takes place
on such date, the average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange, or if the Common Stock is
not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the closing sale price of the Common Stock or in case no reported sale takes
place, the average of the closing bid and asked prices, on NASDAQ or any
comparable system. If the Common Stock is not quoted on NASDAQ or any
comparable system, the Board of Directors shall in good faith determine the
current market price on the basis of such quotation as it considers
appropriate.
(d) If a holder converts a share or shares of the 6 1/4% Preferred
Stock, the Corporation shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of Common Stock upon the conversion. The
holder, however, shall pay to the Corporation the amount of any tax which is
due (or shall establish to the satisfaction of the Corporation payment
thereof) if the shares are to be issued in a name other than the name of such
holder and shall pay to the Corporation any amount required by the last
sentence of Section 6(a) hereof.
(e) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of the Common Stock enough
shares of the Common Stock to permit the conversion of the then outstanding
shares of the 6 1/4% Preferred Stock. All shares of Common Stock which may
be issued upon conversion of shares of the 6 1/4% Preferred Stock shall be
validly issued, fully paid and nonassessable. In order that the Corporation
may issue shares of the Common Stock upon conversion of shares of the 6 1/4%
Preferred Stock, the Corporation will endeavor to comply with all applicable
Federal and State securities laws and will endeavor to list such shares of the
Common Stock to be issued upon conversion on each securities exchange on which
the Common Stock is listed.
(f) The conversion price in effect at any time shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend or make a
distribution in shares of the Common Stock to holders of any class of capital
stock of the Corporation, (2) subdivide or reclassify the outstanding shares
of the Common Stock into a greater number of shares of the Common Stock or
(3) combine the outstanding shares of the Common Stock into a smaller number
of shares of the Common Stock, the conversion price immediately prior to such
action shall be adjusted so that the holder of any shares of the 6 1/4%
Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of the Common Stock which he would have owned
immediately following such action had such shares of the 6 1/4% Preferred
Stock been converted immediately prior thereto. An adjustment made pursuant
to this Section 6(f)(i) shall become effective immediately after the record
date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision or
combination.
(ii) In case the Corporation shall issue rights or warrants to all
holders of the Common Stock entitling them to subscribe for or purchase
shares of the Common Stock (or securities convertible into shares of the
Common Stock) at a price per share less than the current market price (as
determined pursuant to Section 6(f)(iv)) of the Common Stock on such record
date, the number of shares of the Common Stock into which each share of the 6
1/4% Preferred Stock shall be convertible shall be adjusted so that the same
shall be equal to the number determined by multiplying the number of shares
of the Common Stock into which such share of the 6 1/4% Preferred Stock was
convertible immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of the Common Stock outstanding on
such record date plus the number of additional shares of the Common Stock
offered (or into which the convertible securities so offered are
convertible), and of which the denominator shall be the number of shares of
the Common Stock outstanding on such record date, plus the number of shares
of the Common Stock which the aggregate offering price of the offered shares
of the Common Stock (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price. Such
adjustments shall become effective immediately after such record date.
(iii) In case the Corporation shall distribute to all holders of the
Common Stock evidences of indebtedness or other assets, including securities,
but excluding those dividends, rights, warrants, and distributions referred
to in Section 6(f)(i) and (ii), and dividends and distributions paid in cash
out of profits or surplus, or shall distribute to all holders of the Common
Stock rights or warrants to subscribe for securities (other than those
referred to in Section 6(f)(ii), then, in each such case, the number of
shares of the Common Stock into which each share of the 6 1/4% Preferred
Stock shall be convertible shall be adjusted so that the same shall equal the
number determined by multiplying the number of shares of the Common Stock
into which such share of the 6 1/4% Preferred Stock was convertible
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the current market price (determined as provided in
Section 6(f)(iv) of the Common Stock on the record date mentioned below, and
of which the denominator shall be such current market price of the Common
Stock, less the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive evidence of such fair
market value) of the portion of the assets so distributed or of such
subscription rights or warrants applicable to one share of the Common Stock.
Such adjustment shall become effective immediately after the record date for
the determination of the holders of the Common Stock entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the
Corporation shall distribute rights or warrants (other than those referred to
in Section 6(f)(ii)) ("Rights") pro rata to holders of the Common Stock, the
Corporation may, in lieu of making any adjustment pursuant to this Section
6(f)(iii), make proper provision so that each holder of a share of the 6
1/4% Preferred Stock who converts such share after the record date for such
distribution and prior to the expiration or redemption of the Rights shall be
entitled to receive upon such conversion, in addition to the shares of the
Common Stock issuable upon such conversion (the "Conversion Shares"), a
number of Rights to be determined as follows: (i) if such conversion occurs
on or prior to the date for the distribution to the holders of Rights of
separate certificates evidencing such Rights (the "Distribution Date"), the
same number of Rights to which a holder of a number of shares of the Common
Stock equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of and applicable
to the Rights; and (ii) if such conversion occurs after the Distribution
Date, the same number of Rights to which a holder of the number of the Common
Stock into which a share of the 6 1/4% Preferred Stock so converted was
convertible immediately prior to the Distribution Date would have been
entitled on the Distribution Date in accordance with the terms and provisions
of and applicable to the Rights.
(iv) The current market price per share of the Common Stock on any
date shall be deemed to be the average of the daily closing prices for thirty
consecutive trading days commencing forty-five trading days before the day in
question. The closing price for each day shall be the last reported sales
price regular way or, in case no such reported sale takes place on such date,
the average of the reported closing bid and asked prices regular way, in
either case on the New York Stock Exchange, or if the Common Stock is not
listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, the closing sale price of the Common Stock, or in case no reported
sale takes place the average of the closing bid and asked prices, on NASDAQ
or any comparable system, or if the Common Stock is not quoted on NASDAQ or
any comparable system, the closing sale price or, in case no reported sale
takes place, the average of the closing bid and asked prices, as furnished by
any two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Corporation for that purpose.
(v) In any case in which this Section 6 shall require that an
adjustment be made immediately following a record date, the Corporation may
elect to defer (but only until five business days following the mailing of
the notice described in Section 6(j)) issuing to the holder of any share of
the 6 1/4% Preferred Stock converted after such record date the shares of
the Common Stock and other capital stock of the Corporation issuable upon
such conversion over and above the shares of the Common Stock and other
capital stock of the Corporation issuable upon such conversion only on the
basis of the conversion price prior to adjustment; and, in lieu of the shares
the issuance of which is so deferred, the Corporation shall issue or cause
its transfer agents to issue due bills or other appropriate evidence of the
right to receive such shares.
(g) No adjustment in the conversion price shall be required until
cumulative adjustments result in a concomitant change of 1% or more of the
conversion price as existed prior to the last adjustment of the conversion
price; provided, however, that any adjustments which by reason of this
Section 6(g) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 6 shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be. No adjustment to the conversion price shall be
made for cash dividends.
(h) In the event that, as a result of an adjustment made pursuant
to Section 6(f), the holder of any share of the 6 1/4% Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of capital stock of the Corporation other than shares of the Common
Stock, thereafter the number of such other shares so receivable upon
conversion of any shares of the 6 1/4% Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
this Section 6.
(i) The Corporation may make such decreases in the conversion
price, in addition to those required by Sections 6(f)(i), (ii) and (iii), as
it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be
taxable to the holders of the Common Stock.
(j) Whenever the conversion price is adjusted, the Corporation
shall promptly mail to all holders of record of shares of the 6 1/4%
Preferred Stock a notice of the adjustment and shall cause to be prepared a
certificate signed by a principal financial officer of the Corporation setting
forth the adjusted conversion price and a brief statement of the facts
requiring such adjustment and the computation thereof; such certificate shall
forthwith be filed with each transfer agent for the shares of the 6 1/4%
Preferred Stock.
(k) In the event that:
(1) the Corporation takes any action which would require an
adjustment in the conversion price,
(2) the Corporation consolidates or merges with, or transfers all
or substantially all of its assets to, another corporation and stockholders
of the Corporation must approve the transaction, or
(3) there is a dissolution or liquidation of the Corporation,
a holder of shares of the 6 1/4% Preferred Stock may wish to convert some or
all of such shares into shares of the Common Stock prior to the record date
for, or the effective date of, the transaction so that he may receive the
rights, warrants, securities or assets which a holder of shares of the Common
Stock on that date may receive. Therefore, the Corporation shall mail to
holders of shares of the 6 1/4% Preferred Stock a notice stating the proposed
record or effective date of the transaction, as the case may be. The
Corporation shall mail the notice at least 10 days before such date; however,
failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in clause (1), (2) or (3) of this
Section 6(k).
(l) If any of the following shall occur, namely: (i) any
reclassification or change of outstanding shares of the Common Stock issuable
upon conversion of shares of the 6 1/4% Preferred Stock (other than a change
in par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger to which the Corporation is a party other than a
merger in which the Corporation is the continuing corporation and which does
not result in any reclassification of, or change (other than a change in name,
or par value, or as a result of a subdivision or combination) in, outstanding
shares of the Common Stock or (iii) any sale or conveyance of all or
substantially all of the property or business of the Corporation as an
entirety, then the Corporation, or such successor or purchasing corporation,
as the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale or conveyance, provide in its certificate
of incorporation or other charter document that each share of the 6 1/4%
Preferred Stock shall be convertible into the kind and amount of shares of
capital stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance
by a holder of the number of shares of the Common Stock deliverable upon
conversion of such share of the 6 1/4% Preferred Stock immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance.
Such certificate of incorporation or other charter document shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The foregoing, however, shall not
in any way affect the right a holder of a share of the 6 1/4% Preferred Stock
may otherwise have, pursuant to clause (ii) of the last sentence of Section
6(f)(iii), to receive Rights upon conversion of a share of the 6 1/4%
Preferred Stock. If, in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of the Common Stock includes shares of
capital stock or other securities and property of a corporation other than the
successor or purchasing corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then the certificate of
incorporation or other charter document of such other corporation shall
contain such additional provisions to protect the interests of the holders of
shares of the 6 1/4% Preferred Stock as the Board of Directors shall
reasonably consider necessary by reason of the foregoing. The provision of
this Section 6(l) shall similarly apply to successive consolidations, mergers,
sales or conveyances.
SECTION 7. RANKING. With respect to rights to receive dividends
or distributions upon liquidation of the Corporation, the 6 1/4% Preferred
Stock shall rank prior to the Common Stock and on a parity with any other
Preferred Stock issued by the Corporation, unless the terms of such other
Preferred Stock provide otherwise and, if applicable, the requirements of
Section 8 hereof have been complied with.
SECTION 8. LIMITATIONS. In addition to any other rights provided
by applicable law, so long as any shares of the 6 1/4% Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote, or the
written consent as provided by law, of the holders of at least two-thirds
(2/3) of the outstanding shares of the 6 1/4% Preferred stock, voting as a
single class:
(a) create, authorize, or issue any class or series of, or rights
to subscribe to or any security convertible into, capital stock ranking
senior to the 6 1/4% Preferred Stock as to payment of dividends, in
distribution of assets upon liquidation or in voting rights; or
(b) amend, alter or appeal, whether by merger, consolidation or
otherwise, any of the provisions of the Certificate of Incorporation
(including this Certificate of Designation) that would change the
preferences, rights or powers with respect to the 6 1/4% Preferred Stock so
as to affect the 6 1/4% Preferred Stock adversely;
but (except as otherwise required by applicable law) nothing herein contained
shall require such a vote or consent (i) in connection with any increase in
the total number of authorized shares of the Common Stock, or (ii) in
connection with the authorization or increase of any class or series of shares
ranking, as to dividends and distribution of assets upon liquidation, pari
passu with or junior to the 6 1/4% Preferred Stock; provided, however,
that no such vote or written consent of the holders of the shares of the 6
1/4% Preferred Stock shall be required if, at or prior to the time when the
issuance of any such shares ranking prior to the 6 1/4% Preferred Stock is to
be made or any such change is to take effect, as the case may be, provision is
made for the redemption of all the then outstanding shares of the 6 1/4%
Preferred Stock.
<PAGE>
SECTION 9. NO PREEMPTIVE RIGHTS. No holder of shares of the 6
1/4% Preferred Stock will possess any preemptive rights to subscribe for or
acquire any unissued shares of capital stock of the Corporation (whether now
or hereafter authorized) or securities of the Corporation convertible into or
carrying a right to subscribe to or acquire shares of capital stock of the
Corporation.
AND HEREBY FURTHER CERTIFIES THAT this Certificate of Designation shall be
effective on September 22, 1995 at 8:31 a.m. (Eastern Time).
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by Edmund Burke, Executive V.P., and
attested by Beverly Adams, its Asst Secretary this 20th day
of September.
Burlington Northern Inc.
By: /s/ Edmund Burke
Attested:
By: /s/ Beverly A. Edwards-Adams
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information from Burlington Northern Inc.'s
consolidated financial statements as of and for the nine month period ended
September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 29
<SECURITIES> 0
<RECEIVABLES> 745
<ALLOWANCES> 29
<INVENTORY> 139
<CURRENT-ASSETS> 1111
<PP&E> 10560
<DEPRECIATION> 3975
<TOTAL-ASSETS> 8865
<CURRENT-LIABILITIES> 1483
<BONDS> 2423
<COMMON> 1461<F2>
0
336<F2>
<OTHER-SE> 777
<TOTAL-LIABILITY-AND-EQUITY> 8865
<SALES> 0
<TOTAL-REVENUES> 4018
<CGS> 0
<TOTAL-COSTS> 3300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 610
<INCOME-TAX> 238
<INCOME-CONTINUING> 372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 372
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Provision for doubtful accounts is included in total costs.
<F2>Includes the respective additional paid-in capital.
</FN>
</TABLE>
