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 1-11535
BURLINGTON NORTHERN SANTA FE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-1804964
(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, $.01 par value
as of October 31, 1995 142,123,737 shares
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 29
Item 6. Exhibits and Reports on Form 8-K 29
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 1,460 $ 1,249 $ 4,091 $ 3,651
Operating expenses:
Compensation and benefits 464 437 1,404 1,310
Equipment rents 120 97 352 314
Purchased services 111 120 325 352
Fuel 109 95 307 267
Depreciation and amortization 109 91 307 267
Materials 78 70 227 225
Other 98 110 288 327
Merger and severance 106 - 148 -
-------- -------- -------- --------
Total operating expenses 1,195 1,020 3,358 3,062
-------- -------- -------- --------
Operating income 265 229 733 589
Interest expense 52 40 145 118
Other income (expense), net 16 (1) 31 (7)
-------- -------- -------- --------
Income before income taxes 229 188 619 464
Income tax expense 90 73 242 180
-------- -------- -------- --------
Income before cumulative effect of
change in accounting method 139 115 377 284
Cumulative effect of change in
accounting method, net of tax - - - (10)
-------- -------- -------- --------
Net income $ 139 $ 115 $ 377 $ 274
======== ======== ======== ========
Primary earnings per common share:
Income before cumulative effect of
change in accounting method $ 1.38 $ 1.22 $ 3.90 $ 2.97
Change in accounting method - - - (.11)
-------- -------- -------- --------
Primary earnings per common share $ 1.38 $ 1.22 $ 3.90 $ 2.86
======== ======== ======== ========
Average shares (in thousands) 96,870 90,167 92,685 90,230
Fully diluted earnings per common
share:
Income before cumulative effect
of change in accounting method $ 1.34 $ 1.18 $ 3.76 $ 2.92
Change in accounting method - - - (.11)
-------- -------- -------- --------
Fully diluted earnings per
common share $ 1.34 $ 1.18 $ 3.76 $ 2.81
======== ======== ======== ========
Average shares (in thousands) 104,311 97,507 100,496 97,571
Dividends declared per common share $ .30 $ .30 $ .90 $ .90
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION 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 $ 62 $ 27
Accounts receivable, net 766 697
Materials and supplies 218 100
Current portion of deferred income taxes 297 156
Other current assets 71 32
-------- -------
Total current assets 1,414 1,012
Property and equipment, net 16,019 6,311
Other assets 922 269
-------- -------
Total assets $18,355 $7,592
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 2,132 $1,325
Long-term debt and commercial paper due
within one year 154 122
-------- -------
Total current liabilities 2,286 1,447
Long-term debt and commercial paper 4,164 1,697
Deferred income taxes 4,479 1,456
Casualty and environmental reserves 637 416
Other liabilities 1,431 339
-------- -------
Total liabilities 12,997 5,355
-------- -------
Stockholders' equity:
Convertible preferred stock and additional
paid-in capital, $.01 par value,
$344 liquidation value; 25,000,000 shares
authorized; 6,900,000 shares issued;
6,878,607 shares and 6,900,000 shares
outstanding, respectively 336 337
Common stock, $.01 par value, 300,000,000
shares authorized; 141,875,749 shares and
89,329,259 shares issued, respectively 1 1
Additional paid-in capital 4,250 1,443
Retained earnings 792 485
Other (21) (29)
-------- -------
Total stockholders' equity 5,358 2,237
-------- -------
Total liabilities and stockholders'
equity $18,355 $7,592
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION 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 $ 377 $ 274
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting method - 10
Depreciation and amortization 307 267
Deferred income taxes 51 73
Other, net 38 (16)
Changes in current assets and liabilities,
excluding SFP assets/liabilities acquired:
Accounts receivable, net (21) (20)
Materials and supplies (39) (28)
Other current assets (19) (102)
Accounts payable and other current liabilities 156 131
-------- ------
Net cash flow from operating activities 850 589
-------- ------
Cash flows from investing activities:
Purchase of SFP, net of cash acquired (488) (4)
Additions to property and equipment (572) (503)
Other, net (3) 8
-------- ------
Net cash flow from investing activities (1,063) (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 (713) (191)
Dividends paid (97) (96)
Other, net 12 4
-------- ------
Net cash flow from financing activities 248 (90)
-------- ------
Increase in cash and cash equivalents 35 -
Cash and cash equivalents:
Beginning of period 27 17
-------- ------
End of period $ 62 $ 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
Noncash consideration for purchase of SFP:
Net assets acquired $ 3,319
Cash paid (532)
Cash acquired 26
--------
Noncash consideration $ 2,813
========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Acquisition of Santa Fe Pacific Corporation
Burlington Northern Santa Fe Corporation (BNSF) was incorporated in Delaware
on December 16, 1994, for the purpose of effecting a business combination
between Burlington Northern Inc. (BNI) and Santa Fe Pacific Corporation (SFP).
The accompanying BNSF consolidated statements of income 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 reflect BNI's
historical results for such periods and SFP's results from September 22, 1995
through September 30, 1995. The accompanying BNSF balance sheet reflects (i)
BNI historical amounts at December 31, 1994 and (ii) BNI historical amounts
plus assets and liabilities of SFP at September 30, 1995, including the fair
value write-up of SFP resulting from purchase accounting.
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
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, SFP borrowed $1.0 billion under a credit
facility (the SFP Credit Facility) of which $760 million of the proceeds were
used to purchase the 38 million shares pursuant to the Tender Offer. In
addition, BNI borrowed $500 million under a credit facility (the BNI 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.
Prior to consummation of the Merger, BNI accounted for the $500 million
investment in SFP under the cost method. Upon consummation of the Merger,
BNI's equity in earnings of SFP prior to the Merger of $16 million was
recorded as other income.
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, which reflects the effects of the Repurchase Program discussed
below. 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.
Under the Repurchase Program as set forth in the Merger Agreement, SFP was
permitted, at its discretion and subject to certain financial and performance
criteria of SFP set forth in its credit agreement and the Merger Agreement
(including minimum cash flows, cash capital expenditures and maximum total
debt), to repurchase up to 10 million shares of SFP common stock prior to
consummation of the Merger. In the Merger Agreement, the exchange ratio of
BNSF common shares for each share of outstanding SFP common stock upon
consummation of the Merger was set at not less than 0.40 shares, with
repurchases under the Repurchase Program increasing the exchange ratio pro
rata to not more than 0.4347 shares. As of September 22, 1995, the date of
consummation, SFP had repurchased approximately 3.6 million shares which,
along with the effect of SFP stock options exercised, resulted in the final
exchange ratio of 0.41143945 shares.
The business combination with SFP was accounted for by the purchase method.
As such, the accompanying consolidated financial statements include assets,
liabilities and financial results of SFP after Merger consummation. The
following summarizes the purchase price (dollars in millions, except per share
data, and shares in thousands):
<TABLE>
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BNI investment in SFP $ 516
Shares of SFP common stock outstanding at
September 22, 1995 151,396
Less SFP shares held by BNI (25,000)
-----------
Remaining SFP shares outstanding 126,396
Exchange Ratio .41143945
-----------
Shares of BNSF common stock issued 52,004
Per share value of BNSF common stock $ 51
-----------
Total value of BNSF common stock issued 2,652
Value of outstanding SFP stock options 119
BNI direct acquisition costs 32
------
Purchase price $3,319
======
</TABLE>
The purchase price was calculated based on an estimated fair value of BNSF
common stock of $51 per share. The fair value was determined from the average
of the daily closing prices of BNI common stock for the five trading days
immediately preceding and the five trading days immediately following approval
of the Merger by BNI and SFP shareholders which occurred on February 7, 1995.
The effects of the acquisition on the consolidated balance sheet, including
the fair value adjustments, were as follows (dollars in millions):
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Property and equipment, net $ 9,425
Other assets 851
Deferred income taxes (2,936)
Long-term debt (2,034)
Other liabilities (1,987)
--------
Net assets acquired $ 3,319
========
</TABLE>
The purchase price allocation includes a $120 million increase in other
liabilities for anticipated nonrecurring costs and expenses for severance and
relocation of prior SFP employees. This amount reflects BNSF's best current
estimate of such costs. Changes to this liability may affect the final
purchase price allocation.
The pro forma results listed below were prepared as if the Merger had occurred
on January 1, 1994 and include the historical results of BNI and SFP,
excluding the combined after tax effect of $42 million for merger-related
costs expensed by BNI and SFP in 1995. Additionally, the pro forma results
for both periods include the estimated effects of purchase accounting
adjustments and the Tender Offer. Pro forma adjustments reflecting
anticipated merger benefits are not included. This unaudited pro
forma information is not necessarily indicative of the results of operations
that might have occurred had the Merger actually taken place on the date
indicated, or of future results of operations of the combined entities
(dollars in millions, except per share data):
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
------ ------
<S> <C> <C>
Revenues $6,078 $5,621
Income from continuing operations 491 363
Net income 491 376
Primary earnings per share:
Income from continuing operations $ 3.27 $ 2.46
Net income 3.27 2.55
Fully diluted earnings per share:
Income from continuing operations $ 3.20 $ 2.44
Net income 3.20 2.53
</TABLE>
2. Accounting policies and interim results
The 1994 Annual Reports on Forms 10-K for BNI and its majority-owned
subsidiaries and SFP and its majority-owned subsidiaries should be read in
conjunction with this Form 10-Q. The principal subsidiary of BNI is
Burlington Northern Railroad Company (BNRR). The principal subsidiary of SFP
is The Atchison, Topeka and Santa Fe Railway Company (ATSF). 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 BNSF'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.
3. Merger and severance expenses
During the second quarter of 1995, BNI 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 for the vesting of restricted stock
held by certain officers and employees of BNI upon approval of the Merger by
the stockholders in February 1995. At the time of vesting, unearned
compensation associated with the restricted stock, previously included in
stockholders' 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.
BNSF 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.
4. Stockholders' equity
Pursuant to the terms of the Merger Agreement, on September 22, 1995, BNSF
issued 141,866,851 shares of common stock, $.01 par value, of which 89,862,751
shares were exchanged for the outstanding shares of BNI common stock and
52,004,100 were exchanged for the outstanding shares of SFP common stock,
excluding the SFP common stock acquired by BNI in the Tender Offer. In
addition, on September 22, 1995, all of the outstanding BNI no par value
cumulative convertible preferred stock was converted to 6,878,607 shares of
BNSF 6 1/4% Cumulative Convertible Preferred Stock, $.01 par value.
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 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. SFP's investments were adjusted to fair value upon the
application of purchase accounting.
In accordance with the Merger Agreement, the outstanding SFP stock options
were converted to BNSF stock options upon consummation of the Merger, which
resulted in 5.3 million BNSF stock options. As of September 30, 1995, BNSF
had a total of 9.9 million stock options outstanding at an average exercise
price of $36.77.
On October 19, 1995, the BNSF board of directors voted to redeem BNSF's 6
1/4% Cumulative Convertible Preferred Stock, Series A, $.01 par value,
effective December 26, 1995, at the redemption price of $52.1875 per share and
declared a dividend which, when paid, will be 74.65 cents per share
(representing the normal quarterly dividend of 78.125 cents per share pro rated
up to the effective redemption date) to holders of record on December 7, 1995.
The dividend will be payable on January 2, 1996. A significant cash
requirement is not expected for redemption of the convertible preferred stock.
It is anticipated that most holders of this preferred stock will elect to
convert their shares into BNSF common stock as the current price of BNSF's
common stock is significantly higher than the redemption price.
5. Environmental reserves and other contingencies
BNSF's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. BNSF'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 BNSF's business operations.
Many of BNSF'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, BNSF 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. BNSF
has been notified that it is a potentially responsible party (PRP) for study
and clean-up costs at approximately 30 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,
BNSF may be considered a PRP under certain other laws. Accordingly, under
CERCLA and other federal and state statutes, BNSF may be held jointly and
severally liable for all environmental costs associated with a particular
site. If there are other PRPs, BNSF 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 BNSF'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. BNSF 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.
BNSF is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 315 sites, including the
Superfund sites, at which it is being asked to participate in the study and/or
clean-up of the environmental contamination. BNI 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. SFP payments for the nine days ending September 30, 1995
were not material. BNSF has accruals of approximately $240 million for
remediation and restoration of all known sites, including $230 million
pertaining to mandated sites, of which approximately $55 million relates to
the Superfund sites. BNSF anticipates that the majority of the accrued costs
at September 30, 1995 will be paid over the next five years, with
approximately $15 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 BNSF'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 BNSF's
best estimates of all costs, without reduction for anticipated recoveries from
third parties, BNSF'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 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 BNSF's consolidated financial position or liquidity.
ATSF and BNRR expect they will become subject to future requirements
regulating air emissions from diesel locomotives that may increase their
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.
BNSF and its subsidiaries are parties 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 BNSF, 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.
6. Hedging activities
Fuel
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.
In addition, as of September 30, 1995, ATSF had entered into various commodity
swap and collar transactions with several counterparties covering
approximately 55 million gallons of diesel fuel in 1995, of which
approximately 40 million gallons was hedged through swap arrangements at an
average price of 50.7 cents per gallon. Additionally, approximately 15
million gallons have been hedged through collar arrangements which allow the
price to float between average floor and ceiling prices of 45.8 cents and 51.0
cents, respectively.
The above 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 and
ATSF's diesel fuel, respectively.
BNSF's current fuel hedging program covers approximately 55 percent of
projected fuel purchases for the fourth quarter of 1995 and approximately 10
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
BNSF's fuel hedging transactions were not material at September 30, 1995.
BNSF monitors its hedging positions and credit ratings of its counterparties
and does not anticipate losses due to counterparty nonperformance.
Interest rates
BNSF has interest rate swap transactions for a total principal amount of $200
million. The interest rate swaps mature from December 1996 through December
1998 and match maturities of existing debt. The interest rate swap
transactions require payment of a weighted average fixed interest rate of
approximately 7.6 percent, and the receipt of a variable interest rate based
on LIBOR.
As of September 30, 1995, BNSF also has interest rate swap transactions for a
total principal amount of $300 million, for the purpose of establishing rates
in anticipation of expected future debt issuances. Swap transactions totaling
$250 million mature in December 2005 through April 2006 and require payment of
a weighted average fixed interest rate of 6.6 percent and receipt of a
variable interest rate based on LIBOR. Another $50 million of the swap
transactions mature in October 2025 and require payment of a weighted average
fixed interest rate of 6.9 percent and receipt of a variable interest rate
based on LIBOR. Any realized gain or loss upon closing of these swap
transactions will be amortized as an adjustment to interest expense over the
term of the related debt. Unrealized gains or losses from BNSF's swap
transactions were not material at September 30, 1995.
7. 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
------ ------ ------ ------
<S> <C> <C> <C> <C>
BNI's equity in earnings of SFP, prior
to the Merger $ 16 $ - $ 16 $ -
Gain on property dispositions 2 6 11 7
Interest income 1 1 7 2
Accounts receivable sale fees - (3) - (7)
Miscellaneous, net (3) (5) (3) (9)
------ ------ ------ ------
Total $ 16 $ (1) $ 31 $ (7)
====== ====== ====== ======
</TABLE>
8. Earnings per common share
Primary earnings per common share are computed by dividing net income, after
deduction of preferred stock dividends, by the weighted average number of
common shares and common share equivalents outstanding. Fully diluted
earnings per common share are computed by dividing net income by the weighted
average number of common shares and common share equivalents outstanding.
Common share equivalents are computed using the treasury stock method. An
average market price is used to determine the number of common share
equivalents for primary earnings per common share. The higher of the average
or end-of-period market price is used to determine common share equivalents
for fully diluted earnings per common share. In addition, the if-converted
method is used for convertible preferred stock when computing fully diluted
earnings per common share. The average number of common shares used for
earnings per share calculations through September 30, 1995 reflect the effect
of common shares issued in connection with the September 22, 1995 merger with
SFP as outstanding for only nine days. Future calculations will therefore
reflect a significant increase in the number of outstanding common shares.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis relates to the financial condition and
results of operations of Burlington Northern Santa Fe Corporation and its
majority-owned subsidiaries (collectively BNSF). The principal subsidiaries
are Burlington Northern Inc. (BNI) and BNI's wholly-owned subsidiary,
Burlington Northern Railroad Company (BNRR), and Santa Fe Pacific Corporation
(SFP) and SFP's wholly-owned subsidiary, The Atchison, Topeka and Santa Fe
Railway Company (ATSF).
CAPITAL RESOURCES AND LIQUIDITY
CASH FROM OPERATIONS
Cash generated from operations is BNSF's principal source of liquidity and is
primarily used for dividends and capital expenditures. For the first nine
months of 1995, cash provided by operating activities increased $261 million
when compared with the first nine months of 1994. This increase was
attributable primarily to a $103 million increase in net income, a $74 million
decrease in the purchase of equipment held in "Other current assets" pending
final financing arrangements and increases in net noncash expenses primarily
related to merger and severance expenses. While current year cash from
operations was sufficient to fund dividends, it was not sufficient to also
completely fund both capital expenditures and expenditures related to the
Merger; therefore, the balance was financed with debt and operating leases.
Available sources for financing needs are discussed below.
OTHER CAPITAL RESOURCES
SFP Credit Facility
During the first quarter of 1995, SFP borrowed $1.0 billion under a credit
facility (the SFP Credit Facility). Proceeds of $760 million from the
borrowing were used by SFP to purchase 38 million shares of SFP common stock
pursuant to the terms of the Tender Offer. The remaining proceeds were used
by SFP to repay SFP's $200 million 12.65% senior notes maturing 1998-2000,
plus the costs associated with the retirement. Subsequent to the first
quarter, SFP borrowed various amounts up to $110 million under the SFP Credit
Facility. As of September 30, 1995, $335 million of the SFP Credit Facility
had been repaid, including $275 million advanced from BNRR which was financed
through the issuance of commercial paper by BNRR. The outstanding balance of
the SFP Credit Facility was $775 million at September 30, 1995. Available
borrowings under the SFP Credit Facility are $285 million. Borrowings under
the SFP Credit Facility are based on variable interest rates (e.g., LIBOR or
prime) plus a credit spread which varies based on SFP's senior unsecured debt
ratings.
BNI Tender Offer Facility
During the first quarter, BNI borrowed $500 million under an unsecured bank
credit facility (the BNI Tender Offer Facility). The proceeds were used to
acquire 25 million shares of SFP common stock at $20 per share pursuant to the
terms of the Tender Offer. As of September 30, 1995, $381 million of the BNI
Tender Offer Facility had been repaid through the issuance of commercial paper
by BNRR. The outstanding balance of the BNI Tender Offer Facility was $119
million at September 30, 1995. Borrowings are based upon LIBOR or certificate
of deposit rates plus a spread based upon BNI's senior unsecured debt ratings
and the amount borrowed under the BNI Tender Offer Facility, or an alternative
base rate.
Commercial paper and other resources
BNRR maintains a program for the issuance, from time to time, of commercial
paper. These borrowings are supported by bank revolving credit agreements.
Outstanding commercial paper balances are considered as reducing available
borrowings under these agreements. The bank revolving credit agreements allow
borrowings of up to $300 million on a short-term basis and $500 million on a
long-term basis. Annual facility fees are currently 0.125 percent and 0.225
percent, respectively, and are subject to change based upon changes in BNRR's
senior secured debt ratings. Borrowings are based upon LIBOR or certificate
of deposit rates plus a spread based upon BNRR's senior secured debt ratings,
or an alternate base rate. The agreements are currently scheduled to expire
on May 3, 1996 and May 6, 1999, respectively. The maturity value of
commercial paper outstanding at September 30, 1995 was $620 million, leaving a
total of $180 million of the long-term revolving credit agreement available.
The maturity value of commercial paper outstanding at December 31, 1994 was
$91 million.
CAPITAL EXPENDITURES AND RESOURCES
A breakdown of capital expenditures, which exclude capital expenditures by SFP
prior to September 22, 1995, is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
----- -----
<S> <C> <C>
Road, roadway structures and real estate $ 467 $ 391
Equipment 105 112
----- -----
Total $ 572 $ 503
===== =====
</TABLE>
Capital roadway expenditures during the first nine months of 1995 increased
when compared with the first nine months of 1994 as a result of extensive
capacity expansion projects, primarily located in the Powder River Basin.
BNSF has a commitment to purchase 187 locomotives from October 1, 1995 through
the end of 1997. This commitment will likely be financed using a combination
of sources including, but not limited to, cash from operations, operating
leases, debt issuances and other miscellaneous sources. The decision on the
method used to finance equipment depends upon current market conditions and
other factors and will be based upon the most appropriate alternative
available at such time. In both the first nine months of 1995 and 1994, BNSF
acquired new equipment to be financed through long-term operating leases which
were primarily for alternating current traction motor locomotives.
DIVIDENDS
Common stock dividends declared for the first nine months of 1995 and 1994
were $.90 per common share. Dividends paid on common and preferred stock were
$97 million and $96 million during the nine months ended September 30, 1995
and 1994, respectively. On October 19, 1995, the BNSF board of directors
declared a dividend of 30 cents per share upon its outstanding shares of
Common Stock, $.01 par value, payable January 2, 1996, to stockholders of
record on December 6, 1995.
On October 19, 1995, the BNSF board of directors voted to redeem BNSF's 6 1/4%
Cumulative Convertible Preferred Stock, Series A, $.01 par value, effective
December 26, 1995, at the redemption price of $52.1875 per share and declared
a dividend which, when paid, will be 74.65 cents per share (representing the
normal quarterly dividend of 78.125 cents per share pro rated up to the
effective redemption date) to holders of record on December 7, 1995. The
dividend will be payable on January 2, 1996. A significant cash requirement
is not expected for redemption of the convertible preferred stock. It is
anticipated that most holders of this preferred stock will elect to convert
their shares into BNSF common stock as the current price of BNSF's common
stock is significantly higher than the redemption price.
CAPITAL STRUCTURE
BNSF's ratio of total debt to total capital was 45 percent at September 30,
1995 and December 31, 1994.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1994
BNSF recorded net income for the third quarter of 1995 of $139 million ($1.38
per common share, primary, on 96.9 million shares and $1.34 per common share,
fully diluted, on 104.3 million shares) compared with net income of $115
million ($1.22 per common share, primary, on 90.2 million shares and $1.18 per
common share, fully diluted, on 97.5 million shares) for the same period in
1994. Results for the third quarter of 1995 were reduced by $106 million of
merger and severance expenses. The corresponding reduction in net income was
$65 million, or $.67 per common share, primary and $.61 per common share,
fully diluted. Excluding the above item, net income for the third quarter of
1995 would have been $204 million, or $2.05 per common share, primary, and
$1.95 per common share, fully diluted.
REVENUES
The following table presents BNSF's revenue information by commodity for the
three months ended September 30, 1995 and 1994 and includes certain
reclassifications of prior year information to conform to current year
presentation. SFP results are included only for the nine days ended September
30, 1995.
<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 $ 447 $ 417 39,683 36,021 $ 11.26 $11.58
Agricultural Commodities 283 178 13,862 7,584 20.42 23.47
Intermodal 188 197 6,287 6,538 29.90 30.13
Minerals 86 87 3,257 3,398 26.40 25.60
Food & Consumer 72 71 2,306 2,514 31.22 28.24
Metals 71 63 3,153 2,805 22.52 22.46
Chemicals 68 61 2,265 2,376 30.02 25.67
Wood 60 67 2,770 3,346 21.66 20.02
Paper 48 41 1,385 1,375 34.66 29.82
Automotive 33 37 326 477 101.23 77.57
Other 31 30 - - - -
------ ------ ------ ------
Total BNI 1,387 1,249 75,294 66,434
SFP, post Merger 73 - 2,654 - 27.29 -
------ ------ ------ ------
Total $1,460 $1,249 77,948 66,434
====== ====== ====== ======
</TABLE>
Total revenues for the third quarter of 1995 were $1,460 million compared with
revenues of $1,249 million for the same period in 1994. The $211 million
increase was primarily due to improved Agricultural Commodities and Coal
revenues as well as the addition of $73 million of SFP revenues for the final
nine days of the quarter in 1995.
Coal revenues improved $30 million during the third quarter of 1995 due to
higher traffic levels. The traffic levels benefited primarily from new
business, increased electricity production and a continued increase in demand
for low-sulfur coal as a result of its economic advantages and compliance with
the Clean Air Act.
Revenues from the transportation of Agricultural Commodities during the third
quarter of 1995 were $105 million greater than the third quarter of 1994.
This increase was principally caused by increases in corn, wheat and soybean
revenues of $82 million, $19 million and $9 million, respectively, partially
offset by a $5 million decrease in barley revenues. Both corn and soybean
revenues benefited primarily from increased crop production as well as higher
traffic volumes to the Pacific Northwest due to stronger export demand during
the third quarter of 1995. Wheat revenues increased due to higher export
demand at the Pacific Northwest and Gulf Coast when compared with 1994. The
shift in commodities to lower yielding corn and soybeans was the primary
factor in the aggregate decrease in revenues per thousand revenue ton miles.
Intermodal revenues decreased $9 million when compared with the third quarter
of 1994 due primarily to a decrease in intermodal domestic revenues.
Increased competition for domestic container business as well as a sluggish
economy in 1995 compared with 1994 contributed to lower domestic container
volumes.
Metals revenues increased $8 million, when compared with the third quarter of
1994. The improvement in Metals revenues was primarily due to increased
taconite and coal coke demand. Steel, aluminum and nonferrous ores revenues,
which also contributed to improved metals revenues, increased primarily due
to higher demand and increased production.
Chemicals and Paper revenues each increased by $7 million while Wood revenues
for the third quarter of 1995 were $7 million less than the third quarter of
1994. The increases in Chemicals and Paper revenues were due to increased
demand. The decrease in Wood revenues was attributable to reduced demand for
lumber due to a weak economy in 1995 compared with 1994.
EXPENSES
Total operating expenses for the third quarter of 1995, including $58 million
of SFP operating expenses after the Merger, were $1,195 million compared with
expenses of $1,020 million for the same period in 1994. The operating ratio
was 82 percent for the third quarter of both 1995 and 1994. Excluding merger
and severance expenses of $106 million, the operating ratio was 75 percent for
1995, an improvement of 7 percentage points over the third quarter of 1994.
Compensation and benefits expenses were $27 million greater compared with the
third quarter of 1994. Of this increase, approximately $20 million was due to
the inclusion of SFP compensation and benefits expenses incurred subsequent to
the Merger. The remainder of the increase is due primarily to increased wages
and related payroll taxes due to higher traffic levels in 1995.
Equipment rents expenses were $23 million higher than the third quarter of
1994 principally due to $17 million increase in lease rental expense as a
result of a larger fleet of leased freight cars, a business volume-related
increase in car hire expense and increased locomotive lease expense. The
increase was also due to the inclusion of $6 million of SFP equipment rents
expense for 1995.
Purchased services expenses for the quarter decreased $9 million compared with
the third quarter of 1994. The most significant contributing factors were a
$10 million decrease in intermodal-related expenses and a $6 million decrease
in joint facilities expenses. These decreases were partially offset by $10
million of SFP purchased services expenses.
Fuel expenses for the quarter were $14 million higher compared with the third
quarter of 1994 primarily due to an $8 million increase in consumption on
higher traffic levels. The average price paid by BNI for diesel fuel was 59.5
cents per gallon in the third quarter of both 1995 and 1994. In addition, $6
million of the increase was due to SFP fuel expenses incurred during the final
nine days of the third quarter.
Depreciation and amortization expense for the third quarter of 1995 was $18
million higher than the same period in 1994 primarily due to an increase in
BNI's asset base, as well as SFP depreciation expense for the nine day period
ending September 30, 1995 of $7 million.
Materials expenses for the third quarter of 1995 increased $8 million compared
with the same period in 1994 due to increased locomotive and car maintenance
and SFP materials expense of $3 million for the nine day period ending
September 30, 1995.
Other operating expenses were $12 million lower compared with the third
quarter of 1994. A $20 million decline due to decreasing costs associated
with personal injury claims was partially offset by SFP other operating
expenses of $6 million and increased employee moving expenses in 1995.
During the third quarter of 1995, merger and severance expenses of $106
million were recorded for employee separation programs, of which approximately
$25 million resulted from pension curtailments and related special termination
benefits.
Interest expense for the quarter increased $12 million compared with the third
quarter of 1994, primarily resulting from the $500 million unsecured debt
incurred in 1995 to finance BNI's investment in SFP.
Other income (expense), net was $17 million higher in the third quarter of
1995 compared with the same period in 1994. This increase in income was
primarily due to BNI's equity in earnings of SFP of $16 million for the period
of BNI's initial investment in SFP through consummation of the Merger.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1994
BNSF recorded net income for the first nine months of 1995 of $377 million
($3.90 per common share, primary, on 92.7 million shares and $3.76 per common
share, fully diluted, on 100.5 million shares) compared with net income of
$274 million ($2.86 per common share, primary, on 90.2 million shares and
$2.81 per common share, fully diluted, on 97.6 million shares) 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, or $.97 per common share, primary, and $.89 per
common share, fully diluted. Results for 1994 were reduced by a $10 million,
or $.11 per common share, 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 $467 million, or $4.87 per
common share, primary, and $4.65 per common share, fully diluted, compared to
$284 million, or $2.97 per common share, primary, and $2.92 per common share,
fully diluted.
REVENUES
The following table presents BNSF'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. SFP results are included only for the nine days ended September
30, 1995.
<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 BNI 4,018 3,651 219,192 189,079
SFP, post Merger 73 - 2,654 - 27.29 -
------ ------ ------- -------
Total $4,091 $3,651 221,846 189,079
====== ====== ======= =======
</TABLE>
Total revenues for the first nine months of 1995 were $4,091 million compared
with revenues of $3,651 million for the same period in 1994. The $440 million
increase was primarily due to improved Agricultural Commodities and Coal
revenues and the addition of $73 million of SFP revenues for the nine day
period ending September 30, 1995.
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, including $58
million of SFP operating expenses after the Merger, were $3,358 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 $94 million greater compared with the
first nine months of 1994. Approximately $20 million of the increase is due
to the inclusion of SFP compensation and benefits expense. 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 $38 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 and the inclusion of
SFP equipment rents expense in 1995.
Purchased services for the first nine months of 1995 decreased $27 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 $40 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 by BNI for diesel fuel of 1.4
cents per gallon to 59.0 cents per gallon in the first nine months of 1995 as
well as SFP fuel expenses included in 1995 contributed to the remainder of the
increase.
Depreciation expense for the first nine months of 1995 was $40 million higher
than the same period in 1994 primarily due to an increase in BNI's asset base
in 1995 and the inclusion of SFP's depreciation expense for a portion of 1995.
Materials expenses for the first nine months of 1995 increased $2 million
compared with 1994 as decreases in track materials costs in 1995 were offset
by increased locomotive materials expense.
Other operating expenses were $39 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 $27 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 SFP.
Other income (expense), net was $38 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 $16 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 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, SFP borrowed $1.0 billion under a credit
facility (the SFP Credit Facility) of which $760 million of the proceeds were
used to purchase the 38 million shares pursuant to the Tender Offer. In
addition, BNI borrowed $500 million under a credit facility (the BNI 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, which reflects the effects of the Repurchase Program discussed
below. 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.
Under the Repurchase Program as set forth in the Merger Agreement, SFP was
permitted, at its discretion and subject to certain financial and performance
criteria of SFP set forth in its credit agreement and the Merger Agreement
(including minimum cash flows, cash capital expenditures and maximum total
debt), to repurchase up to 10 million shares of SFP common stock prior to
consummation of the Merger. In the Merger Agreement, the exchange ratio of
BNSF common shares for each share of outstanding SFP common stock upon
consummation of the Merger was set at not less than 0.40 shares, with
repurchases under the Repurchase Program increasing the exchange ratio pro
rata to not more than 0.4347 shares. As of September 22, 1995, the date of
consummation, SFP had repurchased approximately 3.6 million shares which,
along with the effect of SFP stock options exercised, resulted in the final
exchange ratio of 0.41143945 shares.
The August 23, 1995, ICC decision authorized the Merger, 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. 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, BNSF recorded merger and severance expenses of
$106 million. BNSF 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
BNSF's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation. BNSF'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 BNSF's business operations.
Many of BNSF'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, BNSF 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. BNSF
has been notified that it is a potentially responsible party (PRP) for study
and clean-up costs at approximately 30 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,
BNSF may be considered a PRP under certain other laws. Accordingly, under
CERCLA and other federal and state statutes, BNSF may be held jointly and
severally liable for all environmental costs associated with a particular
site. If there are other PRPs, BNSF 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 BNSF'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. BNSF 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.
BNSF is involved in a number of administrative and judicial proceedings and
other mandatory clean-up efforts at approximately 315 sites, including the
Superfund sites, at which it is being asked to participate in the study and/or
clean-up of the environmental contamination. BNI 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. SFP payments for the nine days ending September 30, 1995
were not material. BNSF has accruals of approximately $240 million for
remediation and restoration of all known sites, including $230 million
pertaining to mandated sites, of which approximately $55 million relates to
the Superfund sites. BNSF anticipates that the majority of the accrued costs
at September 30, 1995 will be paid over the next five years, with
approximately $15 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 BNSF'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 BNSF's
best estimates of all costs, without reduction for anticipated recoveries from
third parties, BNSF'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 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 BNSF's consolidated financial position or liquidity.
ATSF and BNRR expect they will become subject to future requirements
regulating air emissions from diesel locomotives that may increase their
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
Fuel
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.
In addition, as of September 30, 1995, ATSF had entered into various commodity
swap and collar transactions with several counterparties covering
approximately 55 million gallons of diesel fuel in 1995, of which
approximately 40 million gallons was hedged through swap arrangements at an
average price of 50.7 cents per gallon. Additionally, approximately 15
million gallons have been hedged through collar arrangements which allow the
price to float between average floor and ceiling prices of 45.8 cents and 51.0
cents, respectively.
The above 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 and
ATSF's diesel fuel, respectively.
BNSF's current fuel hedging program covers approximately 55 percent of
projected fuel purchases for the fourth quarter of 1995 and approximately 10
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
BNSF's fuel hedging transactions were not material at September 30, 1995.
BNSF monitors its hedging positions and credit ratings of its counterparties
and does not anticipate losses due to counterparty nonperformance.
Interest rates
BNSF has interest rate swap transactions for a total principal amount of $200
million. The interest rate swaps mature from December 1996 through December
1998 and match maturities of existing debt. The interest rate swap
transactions require payment of a weighted average fixed interest rate of
approximately 7.6 percent, and the receipt of a variable interest rate based
on LIBOR.
As of September 30, 1995, BNSF also has interest rate swap transactions for a
total principal amount of $300 million, for the purpose of establishing rates
in anticipation of expected future debt issuances. Swap transactions totaling
$250 million mature in December 2005 through April 2006 and require payment of
a weighted average fixed interest rate of 6.6 percent and receipt of a
variable interest rate based on LIBOR. Another $50 million of the swap
transactions mature in October 2025 and require payment of a weighted average
fixed interest rate of 6.9 percent and receipt of a variable interest rate
based on LIBOR. Any realized gain or loss upon closing of these swap
transactions will be amortized as an adjustment to interest expense over the
term of the related debt. Unrealized gains or losses from BNSF's swap
transactions were not material at September 30, 1995.
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.
BNSF's railroad operating subsidiaries 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 and held 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 and ATSF are each parties to service interruption insurance agreements
under which on a combined basis they would be required to pay premiums of up
to a maximum of approximately $106 million in the event of work stoppages on
other railroads related to ongoing national bargaining. BNRR and ATSF are
also entitled to receive payments under certain conditions if a work stoppage
occurs on either property.
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION 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
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.
ITEM 2. CHANGES IN SECURITIES
On October 19, 1995, the BNSF board of directors voted to redeem BNSF's 6 1/4%
Cumulative Convertible Preferred Stock, Series A, $.01 par value, effective
December 26, 1995, at the redemption price of $52.1875 per share and declared
a dividend which, when paid, will be 74.65 cents per share (representing the
normal quarterly dividend of 78.125 cents per share prorated up to the
effective redemption date) to holders of record on December 7, 1995. The
dividend will be payable on January 2, 1996. A significant cash requirement
is not expected for redemption of the convertible preferred stock. It is
anticipated that most holders of this preferred stock will elect to convert
their shares into BNSF common stock as the current price of BNSF's common
stock is significantly higher than the redemption price.
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 SANTA FE CORPORATION
(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 SANTA FE CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Nature of Exhibit
3.1 Amended and Restated Certificate of Incorporation of BNSF
(amended as of September 11, 1995)
3.2 By-laws of BNSF
4 Certificate of Designation of 6 1/4% Cumulative Convertible
Preferred Stock, Series A, $.01 par value, of BNSF
10.1 Burlington Northern Santa Fe Corporation Long Term Incentive
Stock Plan. Incorporated by reference to Exhibit 4(c) to
BNSF's registration statement on Form S-8 (Commission File
No. 33-63247) dated September 22, 1995. *
10.2 Burlington Northern Santa Fe Corporation Incentive Stock
Compensation Plan. Incorporated by reference to Exhibit 4(c)
to BNSF's registration statement on Form S-8 (Commission
File No. 33-63253) dated September 22, 1995. *
10.3 Burlington Northern Santa Fe Corporation 1987 Stock Option
Incentive Plan. Incorporated by reference to Exhibit 4.1
to BNSF's registration statement on Form S-8 (Commission
File No. 33-62833) dated September 22, 1995. *
10.4 Burlington Northern Santa Fe Corporation 1992 Stock Option
Incentive Plan. Incorporated by reference to Exhibit 4.1
to BNSF's registration statement on Form S-8 (Commission
File No. 33-62839) dated September 22, 1995. *
10.5 Burlington Northern Santa Fe Corporation Incentive
Compensation Plan. Incorporated by reference to Exhibit
4.1 to BNSF's registration statement on Form S-8
(Commission File No. 33-62835) dated September 22, 1995. *
10.6 Burlington Northern Santa Fe Corporation 1993 Employee Stock
Purchase Plan. Incorporated by reference to BNSF's
registration statement on Form S-8 (Commission File No.
33-62827) dated September 22, 1995. *
10.7 Burlington Northern Santa Fe Corporation 1995 2.5 Club Stock
Option Plan. Incorporated by reference to BNSF's
registration statement on Form S-8 (Commission File No.
33-62837) dated September 22, 1995. *
10.8 Burlington Northern Santa Fe Corporation 1982 Stock Option
Incentive Plan. Incorporated by reference to BNSF's
registration statement on Form S-8 (Commission File No.
33-62841) dated September 22, 1995. *
10.9 Burlington Northern Santa Fe Corporation 1990 Directors
Stock Option Plan. Incorporated by reference to BNSF's
registration statement on Form S-8 (Commission File No.
33-62825) dated September 22, 1995. *
E-1
Exhibit Nature of Exhibit
11 Computation of earnings per common share.
12 Statement regarding computation of ratio
of earnings to fixed charges.
27 Financial Data Schedule.
* Management compensatory plan or arrangement.
E-2
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BNSF CORPORATION
FIRST: The name of the corporation is BNSF Corporation.
SECOND: The registered office of the corporation in the State of
Delaware is located at 1209 Orange Street in the City of Wilmington, County of
New Castle, and the name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The total number of shares of all classes of stock which
the corporation shall have authority to issue is 375,000,000 shares, of which
25,000,000 shall be Preferred Stock, $0.01 par value per share (hereinafter
referred to as the "$0.01 Par Value Preferred Stock"), 50,000,000 shall be
Class A Preferred Stock, $0.01 par value per share (hereinafter referred to as
the "Class A Preferred Stock") (such $0.01 Par Value Preferred Stock and Class
A Preferred Stock being hereinafter referred to collectively as the "Preferred
Stock"), and 300,000,000 shall be Common Stock, $0.01 par value per share.
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 corporation, 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.
SECTION II. PROVISIONS RELATING TO CLASS A PREFERRED STOCK $0.01 PAR VALUE
1. The Class A Preferred Stock $0.01 Par Value shall constitute
a single class of Preferred Stock and shall be designated "Class A Preferred
Stock $0.01 Par Value."
2. The Board of Directors is expressly authorized to adopt, from
time to time, a resolution or resolutions providing for the issuance of Class
A Preferred Stock $0.01 Par Value in one or more series, to fix the number of
shares in each such series and to fix the designations and 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 Class A Preferred Stock $0.01 Par Value).
(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;
(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;
(h) Whether, and the extent to which, any of the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of any such series may be made dependent upon facts ascertainable
outside of the Certificate of Incorporation or of any amendment thereto, or
outside the resolution or resolutions providing for the issuance of such
series adopted by the Board of Directors, provided that the manner in which
such facts shall operate upon the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of such series is
clearly and expressly set forth in the resolution or resolutions providing for
the issuance of such series adopted by the Board of Directors; and
(i) 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.
SECTION III. PROVISIONS RELATING TO ALL PREFERRED STOCK
1. All shares of Preferred Stock shall be of equal rank as to
dividends and as to distribution upon liquidation, dissolution or winding up
except to the extent otherwise provided with respect to any series of the
$0.01 Par Value Preferred Stock or any series of the Class A Preferred Stock
$0.01 Par Value by the resolution or resolutions of the Board of Directors
creating such series.
2. The provisions of this paragraph 2 shall be applicable,
except to the extent otherwise provided with respect to any series of $0.01
Par Value Preferred Stock or any series of Class A Preferred Stock $0.01 Par
Value in the resolution or resolutions of the Board of Directors creating such
series, to the redemption of any Preferred Stock which is redeemable under
this Certificate of Incorporation or the resolution or resolutions of the
Board of Directors creating any series of the $0.01 Par Value.
(a) In the case of any redemption of Preferred Stock, whether
with or without premium, notice of redemption shall be mailed at least 30
days in advance of the date designated for such redemption to the holders of
record of the shares of Preferred Stock so to be redeemed at their respective
addresses as the same shall appear on the books of the corporation. In order
to facilitate the redemption of any shares of Preferred Stock that may be
selected for redemption as provided in this paragraph 2, the Board of
Directors is authorized to cause the transfer books of the corporation to be
closed as to such shares at any time not exceeding 50 days prior to the date
designated for redemption thereof. In case of the redemption of less than
all of any series of the $0.01 Par Value Preferred Stock at the time
outstanding, the shares so to be redeemed shall be selected by lot or in such
other equitable manner as the Board of Directors may determine.
(b) If notice shall have been given as aforesaid, and if on or
before the redemption date the funds necessary for such redemption shall have
been set aside by the corporation, separate and apart from its other funds,
for the pro rata benefit of the holders of the shares so called for
redemption, then, notwithstanding that any certificates for shares of
Preferred Stock so called for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding, the right to receive dividends thereon shall cease to accrue
from and after the date for redemption so designated and all rights of
holders of the shares of Preferred Stock so called for redemption shall
forthwith, after such redemption date, cease and terminate, except the right
of the holders thereof to receive the amount payable to them upon such
redemption, without interest, and except the right, if any, of the holders of
such shares to convert such shares on or before the third day prior to the
date designated for such redemption or any other date (not later than the
date designated for such redemption) specified in the resolution or
resolutions of the Board of Directors creating the series of Preferred Stock
of which such shares are a part. Any moneys so set aside by the corporation
and unclaimed at the end of six years from the date fixed for such redemption
shall revert to the general funds of the corporation after which reversion
the holders of such shares so called for redemption shall look only to the
corporation for payment of the amount payable to them upon such redemption
and such shares shall still not be deemed to be outstanding. Any moneys so
set aside by the corporation which shall not be required for such redemption
because of the exercise of any conversion right of any shares to be redeemed
shall revert to the general funds of the corporation forthwith.
3. No holder of Preferred Stock as such shall have any
preemptive right to subscribe to stock, obligations, warrants, rights to
subscribe to stock or other securities of the corporation of any class,
whether now or hereafter authorized.
4. Except as otherwise provided in the resolution or resolutions
of the Board of Directors creating a series of $0.01 Par Value Preferred Stock
or a series of Class A Preferred Stock $0.01 Par Value, dividends on all
shares of Preferred Stock shall be cumulative from the date on which such
shares are first issued and sold or from the last dividend payment date to
which dividends have been paid in full, or declared and set apart for payment,
whichever is later.
5. For the purposes of this Article:
(a) The term "subsidiary" shall mean any corporation of which
the corporation, directly or indirectly, owns or controls such number of
shares of outstanding stock as have ordinary voting power to elect a majority
of the board of directors of such corporation;
(b) The term "outstanding", when used in reference to shares of
stock, shall mean issued shares, excluding shares held by the corporation or
a subsidiary and shares called for redemption funds for the redemption of
which shall have been set aside in accordance with paragraph 2 of this
Section IV;
(c) The amount of dividends "accrued" on any share of Preferred
Stock at any quarterly dividend payment date shall be the amount of any
unpaid dividends accumulated thereon to and including such quarterly dividend
payment date, whether or not earned or declared and whether or not there
shall be funds legally available for the payment of dividends thereon, and
the amount of dividends "accrued" on any share of Preferred Stock as at any
date other than a quarterly dividend payment date shall be the amount of
dividends accrued thereon at the last preceding quarterly dividend payment
date plus a pro rata portion of the annual dividend for the period after such
last preceding quarterly dividend payment date to and including the date as
of which the calculation is made, calculated on the basis of a 360-day year
of twelve 30-day months.
(d) Any class, classes or series of stock of the corporation
shall be deemed to rank
(i) prior to any other class, classes or series of stock of
the corporation either as to dividends or upon liquidation if the holders of
such class, classes or series shall be entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of the class,
classes or series as to which such determination is being made;
(ii) junior to any class, classes or series of stock of the
corporation either as to dividends or upon liquidation if the rights of the
holders of such class, classes or series shall be subject or subordinate to
the rights of the holders of the class, classes or series as to which such
determination is being made in respect of the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the
case may be.
SECTION IV. PROVISIONS RELATING TO COMMON STOCK
1. At all times each holder of Common Stock of the corporation
shall be entitled to one vote for each share of such stock standing in the
name of such holder on the books of the corporation. This paragraph shall not
affect the special voting rights of the Preferred Stock hereinabove set forth.
2. No holder of the Common Stock as such shall have any preemptive
right to subscribe to stock, obligations, warrants, rights to subscribe to
stock or other securities of the corporation of any class, whether now or
hereafter authorized.
3. The rights of holders of the Common Stock shall be subject and
subordinate to the rights of the holders of the Preferred Stock in respect of
dividends and amounts distributable upon liquidation, dissolution or winding
up.
4. 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 6 1/4% Cumulative Convertible Preferred Stock, Series A, No Par
Value of Burlington Northern Inc. (the "Burlington Northern Preferred Stock").
All shares of Common Stock which may be issued upon conversion of the
Burlington Preferred Stock shall be validly issued, fully paid and
nonassessable. In order that the corporation may issue shares of Common Stock
upon conversion of the Burlington Northern Preferred Stock, the corporation
will endeavor to comply with all applicable Federal and State securities laws
and will endeavor to list such shares of Common Stock to be issued upon
conversion on each securities exchange on which the Common Stock is listed.
The Burlington Northern Preferred Stock shall otherwise be convertible into
the same number of shares of Common Stock, at the same conversion price and
upon the same terms and conditions as with respect to the common stock, no par
value of Burlington Northern Inc., including with respect to required
adjustments to the conversion price upon the occurrence of certain events, all
as set forth in the instruments governing the terms of the Burlington Northern
Preferred Stock.
FIFTH: In furtherance and not in limitation of the powers conferred
by law, the Board of Directors is expressly authorized:
1. To adopt, amend or repeal the By-Laws of the
corporation subject to the power of the stockholders of the corporation
having voting power to adopt By-Laws and to amend or repeal By-Laws adopted
or amended by the Board of Directors.
2. To remove at any time any officer elected or
appointed by the Board of Directors by such vote of the Board of Directors as
may be provided for in the By-Laws. Any other officer of the corporation may
be removed at any time by a vote of the Board of Directors, or by any
committee or superior officer upon whom such power of removal may be
conferred by the By-Laws or by a vote of the Board of Directors.
3. To establish bonus, profit sharing, stock option,
stock purchase, retirement or other types of incentive or compensation plans
for the employees (including officers and directors) of the corporation and
to fix the terms of such plans and to determine, or prescribe the method for
determining, the persons to participate in any such plans and the amount of
their respective participations.
4. From time to time to determine whether and to what
extent, and at what time and places and under what conditions and
regulations, the accounts and books of the corporation (other than the stock
ledger) or any of them, shall be open to the inspection of the stockholders;
and no stockholder shall have any right to inspect any account or book or
document of the corporation, except as conferred by the laws of the State of
Delaware or as authorized by the Board of Directors.
SIXTH: In addition to any affirmative vote required by law, this
Certificate of Incorporation, any agreement with any national securities
exchange or otherwise, any "Business Combination" (as hereinafter defined)
involving the corporation shall be subject to approval in the manner set forth
in this Article.
Section I--Definitions
For the purposes of Article SIXTH and Article SEVENTH of this
Certificate of Incorporation:
(a) "Affiliate" and "beneficial owner" are used herein as
defined in Rule 12b-2 and Rule 13d-3, respectively, under the Securities
Exchange Act of 1934 as in effect on the date of adoption of this Section I
by the stockholders of the corporation ("1934 Act"). The term "Affiliate" as
used herein shall exclude the corporation, but shall include the definition
of "Associate" as contained in said Rule 12b-2.
(b) An "Interested Stockholder" is a person other than the
corporation who is (i) the beneficial owner of ten percent or more of the
stock of the corporation entitled to vote for the election of directors
("Voting Stock"), or (ii) an Affiliate of the corporation and (A) at any
time within a two-year period prior to the record date to vote on a Business
Combination was the beneficial owner of ten percent or more of the Voting
Stock, or (B) at the completion of the Business Combination will be the
beneficial owner of ten percent or more of the Voting Stock.
(c) A "Person" is a natural person or a legal entity of any
kind, together with any Affiliate of such person or entity, or any person or
entity with whom such person, entity or an Affiliate has any agreement or
understanding relating to acquiring, voting, or holding Voting Stock.
(d) A "Disinterested Director" is a member of the Board of
Directors of the corporation (other than the Interested Stockholder) who was
a director prior to the time the interested stockholder became an Interested
Stockholder, or any director who was recommended for election by the
Disinterested Directors. Any action to be taken by the Disinterested
Directors shall require the affirmative vote of at least two-thirds of the
Disinterested Directors.
(e) A "Business Combination" is (i) a merger or consolidation
of the corporation of any of its subsidiaries with an Interested Stockholder;
(ii) the sale, lease, exchange, pledge, transfer or other disposition (A) by
the corporation or any of its subsidiaries of all or a Substantial Part of
the corporation's Assets to an Interested Stockholder, or (B) by an
Interested Stockholder of corporation or any of its subsidiaries; (iii) the
issuance of stock or other securities of the corporation or any of its
subsidiaries to an Interested Stockholder, other than on a pro rata basis to
all holders of Voting Stock of the same class held by the Interested
Stockholder or rights; (iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on behalf of an
Interested Stockholder; (v) any reclassification of securities,
recapitalization, merger or consolidation or other transaction which has
effect, directly or indirectly, of increasing the proportionate share of any
Voting Stock beneficially owned by an Interested Stockholder; or (vi) any
agreement, contract or other arrangement providing for any of the foregoing
transactions.
(f) A "Substantial Part of the corporation's Assets" shall
mean assets of the corporation or any of its subsidiaries in an amount equal
to twenty percent or more of the fair market value, as determined by the
Disinterested Directors, of the total consolidated assets of the corporation
and its subsidiaries taken as a whole as of the end of its most recent fiscal
year ended prior to the time the determination is made.
Section II--Vote Required For Business Combinations
The affirmative vote of not less than fifty-one percent of the
Voting Stock, excluding the Voting Stock of an Interested Stockholder who is a
party to the Business Combination, shall be required for the adoption or
authorization of a Business Combination, unless the Disinterested Directors
determine that:
(a) The Interested Stockholder is the beneficial owner of not
less than eighty percent of the Voting Stock and has declared its intention
to vote in favor of or approve such Business Combination; or
(b) (i) The fair market value of the consideration per share
to be received or retained by the holders of each class or series of stock of
the corporation in a Business Combination is equal to or greater than the
consideration per share (including brokerage commissions and soliciting
dealer's fees) paid by such Interested Stockholder in acquiring the largest
number of shares of such class of transactions, whether before or after the
Interested Stockholder became an Interested Stockholder and (ii) the
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance provided by the
corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
Section III--Information Requirements
In the event any vote of holders of Voting Stock is required for the
adoption or approval of any Business Combination, a proxy or information
statement describing the Business Combination and complying with the
requirements of the 1934 Act shall be mailed at a date determined by the
Disinterested directors to all stockholders of the corporation whether or not
such statement is required under the 1934 Act. The statement shall contain
any recommendations as to the advisability of the Business Combination which
the Disinterested Directors, or any of them, may choose to state and, if
deemed advisable by the Disinterested Directors, an opinion of an investment
banking firm as to the fairness of the terms of such Business Combination.
Such firm shall be selected by the Disinterested Directors and paid a fee for
its services by the corporation as approved by the Disinterested Directors.
SEVENTH: Any action by stockholders of the corporation shall be
taken at a meeting of stockholders and no action may be taken by written
consent of stockholders entitled to vote upon such action. No amendment to
the Certificate of Incorporation shall amend, alter, change or repeal any of
the provisions of Article SIXTH hereof or of this Article SEVENTH unless such
amendment shall receive the affirmative vote of not less than fifty-one
percent of the voting Stock, excluding the Voting Stock of any Interested
Stockholder as defined in Article SIXTH.
EIGHTH: To the full extent that the Delaware General Corporation
Law, as it exists on the date hereof or may hereafter be amended, permits the
limitation or elimination of the liability of directors, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any amendment to
or repeal of this Article EIGHTH shall not adversely affect any right or
protection of a director of the corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
NINTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this corporation, as the
case may be, and also on this corporation.
<PAGE>
CERTIFICATE OF CORRECTION OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
BNSF CORPORATION
BNSF Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Company"), does hereby certify:
1. A Certificate of Incorporation of the Company (the
"Certificate") was filed with the Secretary of State of the State of Delaware
on December 16, 1994, as amended and restated on December 21, 1994, which
contains an inaccurate record of the corporate action taken therein referred
to, and said Certificate requires correction as permitted by subsection (f) of
Section 103 of the General Corporation Law of the State of Delaware.
2. The inaccuracy in said Certificate is that it was not intended
that Article SIXTH and Article SEVENTH of the Certificate be effective until
such time as Burlington Northern Inc. ("BNI") and Santa Fe Pacific Corporation
("SFP") become direct or indirect subsidiaries of the Company.
3. Articles SIXTH and SEVENTH of the Certificate are corrected to
read as follows:
SIXTH: Immediately following the time at which BNI and SFP become direct
or indirect subsidiaries of the corporation, in addition to any affirmative
vote required by law, this Certificate of Incorporation, any agreement with
any national securities exchange or otherwise, any "Business Combination" (as
hereinafter defined) involving the corporation shall be subject to approval in
the manner set forth in this Article.
Section I--Definitions
For the purposes of Article SIXTH and Article SEVENTH of this
Certificate of Incorporation:
(a) "Affiliate" and "beneficial owner" are used herein as
defined in Rule 12b-2 and Rule 13d-3, respectively, under the Securities
Exchange Act of 1934 as in effect on the date of adoption of this Section I
by the stockholders of the corporation ("1934 Act"). The term "Affiliate" as
used herein shall exclude the corporation, but shall include the definition
of "Associate" as contained in said Rule 12b-2.
(b) An "Interested Stockholder" is a person other than the
corporation who is (i) the beneficial owner of ten percent or more of the
stock of the corporation entitled to vote for the election of directors
("Voting Stock"), or (ii) an Affiliate of the corporation and (A) at any
time within a two-year period prior to the record date to vote on a Business
Combination was the beneficial owner of ten percent or more of the Voting
Stock, or (B) at the completion of the Business Combination will be the
beneficial owner of ten percent or more of the Voting Stock.
(c) A "Person" is a natural person or a legal entity of any
kind, together with any Affiliate of such person or entity, or any person or
entity with whom such person, entity or an Affiliate has any agreement or
understanding relating to acquiring, voting, or holding Voting Stock.
(d) A "Disinterested Director" is a member of the Board of
Directors of the corporation (other than the Interested Stockholder) who was
a director prior to the time the interested stockholder became an Interested
Stockholder, or any director who was recommended for election by the
Disinterested Directors. Any action to be taken by the Disinterested
Directors shall require the affirmative vote of at least two-thirds of the
Disinterested Directors.
(e) A "Business Combination" is (i) a merger or consolidation
of the corporation of any of its subsidiaries with an Interested Stockholder;
(ii) the sale, lease, exchange, pledge, transfer or other disposition (A) by
the corporation or any of its subsidiaries of all or a Substantial Part of
the corporation's Assets to an Interested Stockholder, or (B) by an
Interested Stockholder of corporation or any of its subsidiaries; (iii) the
issuance of stock or other securities of the corporation or any of its
subsidiaries to an Interested Stockholder, other than on a pro rata basis to
all holders of Voting Stock of the same class held by the Interested
Stockholder or rights; (iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on behalf of an
Interested Stockholder; (v) any reclassification of securities,
recapitalization, merger or consolidation or other transaction which has
effect, directly or indirectly, of increasing the proportionate share of any
Voting Stock beneficially owned by an Interested Stockholder; or (vi) any
agreement, contract or other arrangement providing for any of the foregoing
transactions.
(f) A "Substantial Part of the corporation's Assets" shall
mean assets of the corporation or any of its subsidiaries in an amount equal
to twenty percent or more of the fair market value, as determined by the
Disinterested Directors, of the total consolidated assets of the corporation
and its subsidiaries taken as a whole as of the end of its most recent fiscal
year ended prior to the time the determination is made.
Section II--Vote Required For Business Combinations
The affirmative vote of not less than fifty-one percent of the
Voting Stock, excluding the Voting Stock of an Interested Stockholder who is a
party to the Business Combination, shall be required for the adoption or
authorization of a Business Combination, unless the Disinterested Directors
determine that:
(a) The Interested Stockholder is the beneficial owner of not
less than eighty percent of the Voting Stock and has declared its intention
to vote in favor of or approve such Business Combination; or
(b) (i) The fair market value of the consideration per share
to be received or retained by the holders of each class or series of stock of
the corporation in a Business Combination is equal to or greater than the
consideration per share (including brokerage commissions and soliciting
dealer's fees) paid by such Interested Stockholder in acquiring the largest
number of shares of such class of transactions, whether before or after the
Interested Stockholder became an Interested Stockholder and (ii) the
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance provided by the
corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
Section III--Information Requirements
In the event any vote of holders of Voting Stock is required for the
adoption or approval of any Business Combination, a proxy or information
statement describing the Business Combination and complying with the
requirements of the 1934 Act shall be mailed at a date determined by the
Disinterested directors to all stockholders of the corporation whether or not
such statement is required under the 1934 Act. The statement shall contain
any recommendations as to the advisability of the Business Combination which
the Disinterested Directors, or any of them, may choose to state and, if
deemed advisable by the Disinterested Directors, an opinion of an investment
banking firm as to the fairness of the terms of such Business Combination.
Such firm shall be selected by the Disinterested Directors and paid a fee for
its services by the corporation as approved by the Disinterested Directors.
SEVENTH: Any action by stockholders of the corporation shall be
taken at a meeting of stockholders and no action may be taken by written
consent of stockholders entitled to vote upon such action. No amendment to
the Certificate of Incorporation shall amend, alter, change or repeal any of
the provisions of Article SIXTH hereof or of this Article SEVENTH unless such
amendment shall receive the affirmative vote of not less than fifty-one
percent of the voting Stock, excluding the Voting Stock of any Interested
Stockholder as defined in Article SIXTH. This Article SEVENTH shall not
become effective until immediately following the time at which BNI and SFP
become direct or indirect subsidiaries of the corporation.
<PAGE>
BNSF Corporation has caused this Certificate of Correction of
Amended and Restated Certificate of Incorporation to be signed by Jeffrey R.
Moreland, its Vice President, authorized officer, this 7th day of September,
1995.
By: /s/ Jeffrey R. Moreland
Name: Jeffrey Moreland
Title: Vice President &
Secretary
<PAGE>
AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
BNSF CORPORATION
* * * * *
BNSF Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "GCL"), does hereby amend the Amended and Restated Certificate
of Incorporation of the Corporation, which was originally filed on December
16, 1994.
The undersigned hereby certifies that this Amendment to the Amended
and Restated Certificate of Incorporation has been duly adopted in accordance
with Section 242 of the GCL.
Article 1. is hereby deleted in its entirety and replaced with:
"FIRST: The name of the Corporation is Burlington Northern Santa
Fe Corporation."
THE UNDERSIGNED, being an officer of BNSF Corporation for the
purpose of amending the Amended and Restated Certificate of Incorporation of
the Corporation pursuant to the General Corporation Law of the State of
Delaware, does make this Amended Certificate of Incorporation, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 11th day of
September, 1995.
BNSF Corporation
By: /s/ Douglas J. Babb
Name: Douglas Babbs
Title: President
ATTEST
By: /s/ Jeffrey Moreland
Name: Jeffrey Moreland
Title: Vice President &
Secretary
EXHIBIT 3.2
BY-LAWS
OF
BURLINGTON NORTHERN SANTA FE CORPORATION
TABLE OF CONTENTS
ARTICLE I.
OFFICES 1
SECTION 1. Registered Office and Agent 1
SECTION 2. Other Offices 1
ARTICLE II.
MEETINGS OF STOCKHOLDERS 1
SECTION 1. Annual Meetings 1
SECTION 2. Special Meetings 1
SECTION 3. Place of Meetings 1
SECTION 4. Notice of Meetings 1
SECTION 5. Quorum 2
SECTION 6. Organization 2
SECTION 7. Voting 2
SECTION 8. Inspectors 3
SECTION 9. List of Stockholders 3
SECTION 10. Business at Meetings of Stockholders 3
SECTION 11. No Stockholder Action by Consent 4
ARTICLE III.
BOARD OF DIRECTORS 4
SECTION 1. Number, Qualification and Term of Office 4
SECTION 2. Vacancies 4
SECTION 3. Resignations 4
SECTION 4. Removals 4
SECTION 5. Place of Meetings; Books and Records 4
SECTION 6. Annual Meeting of the Board 5
SECTION 7. Regular Meetings 5
SECTION 8. Special Meetings 5
SECTION 9. Quorum and Manner of Acting 5
SECTION 10. Organization 5
SECTION 11. Consent of Directors in Lieu of Meeting 5
SECTION 12. Telephonic Meetings 6
SECTION 13. Compensation 6
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS 6
SECTION 1. Executive Committee 6
SECTION 2. Audit Committee 6
SECTION 3. Compensation Committee 7
SECTION 4. Committee on Directors and Corporate Governance 8
SECTION 5. Committee Chairman, Books and Records 8
SECTION 6. Alternates 8
SECTION 7. Other Committees 8
SECTION 8. Quorum and Manner of Acting 8
ARTICLE V.
OFFICERS 8
SECTION 1. Number 8
SECTION 2. Election, Term of Office and Qualifications 9
SECTION 3. Resignations 9
SECTION 4. Removals 9
SECTION 5. Vacancies 9
SECTION 6. Compensation of Officers 9
SECTION 7. Chairman of the Board 9
SECTION 8. Non-Executive Vice Chairman 9
SECTION 9. President and Chief Executive Officer 9
SECTION 10. Vice President and Chief Financial Officer 10
SECTION 11. Vice President, Law 10
SECTION 12. Secretary 10
SECTION 13. Treasurer 10
SECTION 14. Absence or Disability of Officers 10
ARTICLE VI.
STOCK CERTIFICATES AND TRANSFER THEREOF 11
SECTION 1. Stock Certificates 11
SECTION 2. Transfer of Stock 11
SECTION 3. Transfer Agent and Registrar 11
SECTION 4. Additional Regulations 11
SECTION 5. Lost, Destroyed or Mutilated Certificates 11
SECTION 6. Record Date 12
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC. 12
ARTICLE VIII.
SEAL 12
ARTICLE IX.
FISCAL YEAR 12
ARTICLE X.
INDEMNIFICATION 12
SECTION 1. Right to Indemnification 12
SECTION 2. Right of Indemnitee to Bring Suit 13
SECTION 3. Nonexclusivity of Rights 13
SECTION 4. Insurance, Contracts and Funding 13
SECTION 5. Definition of Director and Officer 13
SECTION 6. Indemnification of Employees and Agents of the
Corporation 14
ARTICLE XI.
CHECKS, DRAFTS, BANK ACCOUNTS, ETC. 14
SECTION 1. Checks, Drafts, Etc.; Loans 14
SECTION 2. Deposits 14
ARTICLE XII.
NOMINATIONS OF DIRECTOR CANDIDATES 14
SECTION 1. General 14
SECTION 2. Nominations by Board of Directors 14
SECTION 3. Nominations by Stockholders 14
SECTION 4. Substitute Nominees 15
SECTION 5. Void Nominations 15
ARTICLE XIII.
AMENDMENTS 15
BY-LAWS
OF
BURLINGTON NORTHERN SANTA FE CORPORATION
ARTICLE I.
OFFICES
SECTION 1. Registered Office and Agent.
The registered office of the corporation is located at 1209 Orange Street
in the City of Wilmington, County of New Castle, State of Delaware 19801, and
the name of its registered agent at such address is The Corporation Trust
Company.
SECTION 2. Other Offices.
The corporation may have offices at such other places both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meetings.
A meeting of the stockholders for the purpose of electing directors and
for the transaction of such other business as may properly be brought before
the meeting shall be held annually at 10 A.M. on the third Thursday of April,
or at such other time on such other day as shall be fixed by resolution of the
Board of Directors. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day.
SECTION 2. Special Meetings.
Special meetings of the stockholders for any purpose or purposes may be
called at any time by a majority of the Board of Directors, by the Chairman of
the Board, or by the President and shall be called by the Secretary at the
request of the holders of not less than fifty-one percent of all issued and
outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. Place of Meetings.
The annual meeting of the stockholders of the corporation shall be held
at the general offices of the corporation in the City of Ft. Worth, State of
Texas, or at such other place in the United States as may be stated in the
notice of the meeting. All other meetings of the stockholders shall be held
at such places within or without the State of Delaware as shall be stated in
the notice of the meeting.
SECTION 4. Notice of Meetings.
Except as otherwise provided by statute, written notice of each meeting
of the stockholders, whether annual or special, shall be given not less than
ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice shall be
given when deposited in the United States mails, postage prepaid, directed to
such stockholder at his address as it appears in the stock ledger of the
corporation. Each such notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
When a meeting is adjourned to another time and place, notice of the
adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is given. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 5. Quorum.
At any meeting of the stockholders the holders of record of a majority of
the total number of outstanding shares of stock of the corporation entitled to
vote, present in person or represented by proxy, shall constitute a quorum for
all purposes, provided that at any meeting at which the holders of any series
of class of stock shall be entitled, voting as a class, to elect Directors,
the holders of record of a majority of the total number of outstanding shares
of such series or class, present in person or represented by proxy, shall
constitute a quorum for the purpose of such election.
If a quorum is present at any meeting of stockholders, the vote of the
holders of a majority of the shares present in person or represented by proxy
and entitled to vote at the meeting shall be sufficient for the transaction of
any business, unless otherwise provided by statute or the Certificate of
Incorporation.
In the absence of a quorum at any meeting, the holders of a majority of
the shares of stock entitled to vote thereat, present in person or represented
by proxy at the meeting, may adjourn the meeting, from time to time, until the
holders of the number of shares requisite to constitute a quorum shall be
present in person or represented at the meeting. At any adjourned meeting at
which a quorum is present, any business may be transacted that might have been
transacted at the meeting as originally convened.
SECTION 6. Organization.
At each meeting of the stockholders, the Chairman of the Board, or if he
so designates or is absent, the President, shall act as Chairman of the
meeting. In the absence of both the Chairman of the Board and the President,
such person as shall have been designated by the Board of Directors, or in the
absence of such designation a person elected by the holders of a majority in
number of shares of stock present in person or represented by proxy and
entitled to vote, shall act as Chairman of the meeting.
The Secretary or, in his absence, an Assistant Secretary or, in the
absence of the Secretary and all of the Assistant Secretaries, any person
appointed by the Chairman of the meeting shall act as Secretary of the
meeting.
SECTION 7. Voting.
Unless otherwise provided in the Certificate of Incorporation or a
resolution of the Board of Directors creating a series of stock, at each
meeting of the stockholders, each holder of shares of any series or class of
stock entitled to vote at such meeting shall be entitled to one vote for each
share of stock having voting power in respect of each matter upon which a vote
is to be taken, standing in his name on the stock ledger of the corporation on
the record date fixed as provided in these By-Laws for determining the
stockholders entitled to vote at such meeting or, if no record date be fixed,
at the close of business on the day next preceding the day on which notice of
the meeting is given. Shares of its own capital stock belonging to the
corporation, or to another corporation if a majority of the shares entitled to
vote in the election of directors of such other corporation is held by the
corporation, shall neither be entitled to vote nor counted for quorum
purposes.
At each election of Directors the voting shall be by ballot, and the
persons having the greatest number of votes shall be deemed and declared
elected. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, all matters shall be decided by a majority of
the votes cast, a quorum being present.
<PAGE>
SECTION 8. Inspectors.
Prior to each meeting of stockholders, the Board of Directors shall
appoint two Inspectors who are not directors, candidates for directors or
officers of the corporation, who shall receive and determine the validity of
proxies and the qualifications of voters, and receive, inspect, count and
report to the meeting in writing the votes cast on all matters submitted to a
vote at such meeting. In case of failure of the Board of Directors to make
such appointments or in case of failure of any Inspector so appointed to act,
the Chairman of the Board shall make such appointment or fill such vacancies.
Each Inspector, immediately before entering upon his duties, shall
subscribe to an oath or affirmation faithfully to execute the duties of
Inspector at such meeting with strict impartiality and according to the best
of his ability.
SECTION 9. List of Stockholders.
The Secretary or other officer or agent having charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at said meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares of each class and series registered
in the name of each such stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. Such list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present. The
stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this Section, or
the books of the corporation, or to vote in person or by proxy at any such
meeting.
SECTION 10. Business at Meetings of Stockholders.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board, or (c) otherwise properly
brought before the meeting by a stockholder. In addition to any other
applicable requirements, for business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation, not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 65 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th
day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first occurs. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class and number of shares of the corporation which are beneficially owned by
the stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 10 of Article II, provided, however,
that nothing in this Section 10 of Article II shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
annual meeting.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 10 of Article II,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
<PAGE>
SECTION 11. No Stockholder Action by Consent. Any action by stockholders
of the corporation shall be taken at a meeting of stockholders and no action
may be taken by written consent of stockholders entitled to vote upon such
action.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. Number, Qualification and Term of Office.
The business, property and affairs of the corporation shall be managed by
a Board consisting of not less than three or more than twenty-one Directors.
The Board of Directors shall from time to time by a vote of a majority of the
Directors then in office fix within the maximum and minimum limits the number
of Directors to constitute the Board. At each annual meeting of stockholders
a Board of Directors shall be elected by the stockholders for a term of one
year. Each Director shall serve until his successor is elected and shall
qualify.
SECTION 2. Vacancies.
Vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of Directors may be
filled by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director, at any regular or special meeting of
the Board of Directors.
SECTION 3. Resignations.
Any Director may resign at any time upon written notice to the Secretary
of the corporation. Such resignation shall take effect on the date of receipt
of such notice or at any later date specified therein; and the acceptance of
such resignation, unless required by the terms thereof, shall not be necessary
to make it effective. When one or more Directors shall resign effective at a
future date, a majority of the Directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies to take
effect when such resignation or resignations shall become effective.
SECTION 4. Removals.
Any Director may be removed, with cause, at any special meeting of the
stockholders called for that purpose, by the affirmative vote of the holders
of a majority in number of shares of the corporation entitled to vote for the
election of Directors, and the vacancy in the Board caused by any such removal
may be filled by the stockholders at such a meeting.
SECTION 5. Place of Meetings; Books and Records.
The Board of Directors may hold its meetings, and have an office or
offices, at such place or places within or without the State of Delaware as
the Board from time to time may determine.
The Board of Directors, subject to the provisions of applicable statutes,
may authorize the books and records of the corporation, and offices or
agencies for the issue, transfer and registration of the capital stock of the
corporation, to be kept at such place or places outside of the State of
Delaware as, from time to time, may be designated by the Board of Directors.
<PAGE>
SECTION 6. Annual Meeting of the Board.
The first meeting of each newly elected Board of Directors, to be known
as the Annual Meeting of the Board, for the purpose of electing officers,
designating committees and the transaction of such other business as may come
before the Board, shall be held as soon as practicable after the adjournment
of the annual meeting of stockholders, and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held due to the absence of a quorum, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors or as shall be specified in a
written waiver signed by all of the newly elected Directors.
SECTION 7. Regular Meetings.
The Board of Directors shall, by resolution, provide for regular meetings
of the Board at such times and at such places as it deems desirable. Notice
of regular meetings need not be given.
SECTION 8. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman
of the Board or the President and shall be called by the Secretary on the
written request of three Directors on such notice as the person or persons
calling the meeting shall deem appropriate in the circumstances. Notice of
each such special meeting shall be mailed to each Director or delivered to him
by telephone, telegraph or any other means of electronic communication, in
each case addressed to his residence or usual place of business, or delivered
to him in person or given to him orally. The notice of meeting shall state
the time and place of the meeting but need not state the purpose thereof.
Attendance of a Director at any meeting shall constitute a waiver of notice of
such meeting except when a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting was not
lawfully called or convened.
SECTION 9. Quorum and Manner of Acting.
Except as otherwise provided by statute, the Certificate of Incorporation
or these By-Laws, the presence of a majority of the total number of Directors
shall constitute a quorum for the transaction of business at any regular or
special meeting of the Board of Directors, and the act of a majority of the
Directors present at any such meeting at which a quorum is present shall be
the act of the Board of Directors. In the absence of a quorum, a majority of
the Directors present may adjourn the meeting, from time to time, until a
quorum is present. Notice of any such adjourned meeting need not be given.
SECTION 10. Organization.
At every meeting of the Board of Directors, the Chairman of the Board or,
in his absence the President or, if both of the said officers are absent, a
Chairman chosen by a majority of the Directors present shall act as Chairman
of the meeting. The Secretary or, in his absence, an Assistant Secretary or,
in the absence of the Secretary and all the Assistant Secretaries, any person
appointed by the Chairman of the meeting shall act as Secretary of the
meeting.
SECTION 11. Consent of Directors in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or by
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or any committee designated by the Board, may be taken
without a meeting if all members of the Board or committee consent thereto in
writing, and such written consent is filed with the minutes of the proceedings
of the Board or committee.
<PAGE>
SECTION 12. Telephonic Meetings.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such a meeting shall constitute presence in person at such meeting.
SECTION 13. Compensation.
Each Director, who is not a full-time salaried officer of the corporation
or any of its wholly owned subsidiaries, when authorized by resolution of the
Board of Directors may receive as a Director a stated salary or an annual
retainer and in addition may be allowed a fixed fee and his reasonable
expenses for attendance at each regular or special meeting of the Board or any
Committee thereof.
ARTICLE IV.
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. Executive Committee.
The Board of Directors may, in its discretion, designate annually an
Executive Committee consisting of not less than five Directors as it may from
time to time determine. The Committee shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it, but the
Committee shall have no power or authority to amend the Certificate of
Incorporation (except that the Committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation), adopt an
agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property
and assets, recommend to the stockholders a dissolution of the corporation or
a revocation of a dissolution, amend the ByLaws of the corporation, elect
officers or fill vacancies on the Board of Directors or any Committee of the
Board, declare a dividend, authorize the issuance of stock, or such other
powers as the Board may from time to time eliminate. Without limiting the
generality of the foregoing, the Committee shall monitor, review, appraise and
recommend to the Board of Directors appropriate action with respect to the
corporation's capital structure, its source of funds and its financial
position; review and recommend appropriate delegations of authority to
management on expenditures and other financial commitments; review terms and
conditions of financing plans and develop and recommend dividend policies and
recommend to the Board specific dividend payments.
SECTION 2. Audit Committee.
The Board of Directors shall designate annually an Audit Committee
consisting of not less than three directors as it may from time to time
determine, none of whom shall be an officer of the corporation, to assist the
Board in fulfilling its responsibilities with respect to overseeing the
accounting, auditing and financial reporting practices and the internal
control policies and procedures of the corporation.
Specifically, the Audit Committee is authorized and directed on behalf of
the Board to:
(a) Review with the independent accountants the corporation's
financial statements, basic accounting and financial policies and practices,
competency of control personnel, standard and special tests used in verifying
the corporation's statements of account and in determining the soundness of
the corporation's financial condition and report to the Board the results of
such reviews.
(b) Review the policies and practices pertaining to publication
of quarterly and annual statements to assure consistency with audited results
and the implementing of policies and practices recommended by the independent
accountants.
(c) Ensure that suitable independent audits are made of the
operations and results of subsidiary corporations and affiliates.
(d) Review and approve the audit program to be conducted by the
corporation's internal auditors and the results of completed audits.
(e) Review the nature of, and fees charged for, all audit and
non-audit services performed by the corporation's independent auditing firm.
(f) Retain at its discretion independent auditors and legal
counsel, at the expense of the corporation, to assist the Committee in
performing the responsibilities delegated to it in this resolution and
conduct any additional reviews, discussions or investigations which in its
discretion would be of assistance in fulfilling its responsibilities under
this resolution.
(g) Monitor compliance with the corporation's code of business
conduct, and such other duties, functions and powers as the Board may from
time to time prescribe.
SECTION 3. Compensation Committee.
The Board of Directors may, in its discretion, designate annually a
Compensation Committee, consisting of not less than five Directors as it may
from time to time determine. The Committee shall review, report and make
recommendations to the Board of Directors on the following matters:
(a) The compensation of the Chairman of the Board, the
compensation of the President following the Chairman of the Board's
recommendation as to compensation of the President, and the compensation of
all senior officers of the corporation and its principal operating
subsidiaries reporting directly to the President following an annual review
of management's recommendations for such senior officers. If circumstances
involving such senior officers require a salary adjustment between such
reviews, a recommendation may be made directly to the Board of Directors by
the President without the necessity of a meeting of the Compensation and
Nominating Committee.
(b) Management recommendations for individual stock options to
be granted under existing stock option plans to key executives of the
corporation and its subsidiary companies.
(c) The performance of the trustee of the corporation's pension
trust fund and any proposed change in the investment policy of the trustee
with respect to such fund.
(d) Any proposed stock option plans, stock purchase plans,
retirement plans and any other plans, systems and practices of the
corporation relating to the compensation of any employees of the corporation
and any proposed plans of any subsidiary company involving the issuance or
purchase of capital stock of the corporation.
(e) The evaluation of the performance of the officers of the
corporation and, together with management, the selection and recommendation
to the Board of Directors of appropriate individuals for election,
appointment and promotion as officers of the corporation to ensure the
continuity of able, capable management.
(f) Such other matters as the Board may from time to time
prescribe.
<PAGE>
SECTION 4. Committee on Directors and Corporate Governance.
The Board of Directors may, in its discretion, designate annually a
Committee on Directors and Corporate Governance, consisting of not less than
five Directors as it may from time to time determine. The Committee shall
review, report and make recommendations to the Board of Directors on the
following matters:
(a) The size and composition of the Board of Directors and
nominees for Directors; the evaluation of the performance of the Board of
Directors of the corporation and the recommendation to the Board of Directors
of compensation and benefits for Directors.
(b) Such other matters as the Board may from time to time
prescribe.
SECTION 5. Committee Chairman, Books and Records.
Each Committee shall elect a Chairman to serve for such term as it may
determine, shall fix its own rules of procedure and shall meet at such times
and places and upon such call or notice as shall be provided by such rules.
It shall keep a record of its acts and proceedings, and all action of the
Committee shall be reported to the Board of Directors at the next meeting of
the Board.
SECTION 6. Alternates.
Alternate members of the Committees prescribed by this Article IV may be
designated by the Board of Directors from among the Directors to serve as
occasion may require. Whenever a quorum cannot be secured for any meeting of
any such Committees from among the regular members thereof and designated
alternates, the member or members of such Committee present at such meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of such absent or disqualified member.
Alternative members of such Committees shall receive a reimbursement for
expenses and compensation at the same rate as regular members of such
Committees.
SECTION 7. Other Committees.
The Board of Directors may elect such other Committees, each to consist
of two or more Directors, as it may from time to time determine, and each such
Committee shall serve for such term and shall have and may exercise, during
intervals between meetings of the Board of Directors, such duties, functions
and powers as the Board of Directors may from time to time prescribe.
SECTION 8. Quorum and Manner of Acting.
At each meeting of any Committee the presence of a majority of the
members of such Committee, whether regular or alternate, shall be necessary to
constitute a quorum for the transaction of business, and if a quorum is
present the concurrence of a majority of those present shall be necessary for
the taking of any action; provided, however, that no action may be taken by
the Executive Committee or the Finance Committee when two or more officers of
the corporation are present as members at a meeting of either such Committee
unless such action shall be concurred in by the vote of two or more members of
such Committee who are not officers of the corporation.
ARTICLE V.
OFFICERS
SECTION 1. Number.
The officers of the corporation shall be a Chairman of the Board, a
President, a Vice President and Chief Financial Officer, a Vice President,
Law, a Secretary and a Treasurer, each of which officers shall be elected by
the Board of Directors, and such other officers as the Board of Directors may
determine, in its discretion, to elect. Any number of offices may be held by
the same person. Any officer may hold such additional title descriptions or
qualifiers such as "Chief Executive Officer", "Chief Operating Officer",
"Senior Vice President", "Executive Vice President" or "Assistant Secretary"
or such other title as the Board of Directors shall determine.
SECTION 2. Election, Term of Office and Qualifications.
The officers of the corporation shall be elected annually by the Board of
Directors. Each officer elected by the Board of Directors shall hold office
until his successor shall have been duly elected and qualified, or until he
shall have died, resigned or been removed in the manner hereinafter provided.
SECTION 3. Resignations.
Any officer may resign at any time upon written notice to the Secretary
of the corporation. Such resignation shall take effect at the date of its
receipt, or at any later date specified therein; and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary to
make it effective.
SECTION 4. Removals.
Any officer elected or appointed by the Board of Directors may be
removed, with or without cause, by the Board of Directors at a regular meeting
or special meeting of the Board. Any officer or agent appointed by any
officer or committee may be removed, either with or without cause, by such
appointing officer or committee.
SECTION 5. Vacancies.
Any vacancy occurring in any office of the corporation shall be filled
for the unexpired portion of the term in the same manner as prescribed in
these By-Laws for regular election or appointment to such office.
SECTION 6. Compensation of Officers.
The compensation of all officers elected by the Board of Directors shall
be approved or authorized by the Board of Directors or by the President when
so authorized by the Board of Directors or these By-Laws.
SECTION 7. Chairman of the Board.
The Chairman of the Board shall perform such duties as shall be
prescribed by the Board of Directors and, when present, shall preside at all
meetings of the stockholders and the Board of Directors. In the absence or
disability of the Chairman of the Board, the Board of Directors shall
designate a member of the Board to serve as Chairman of the Board and such
designated Board Member shall have the powers and perform the duties of the
office; provided, however, that if the Chairman of the Board shall so
designate or shall be absent from a meeting of stockholders, the President
shall preside at such meeting of stockholders.
SECTION 8. Non-Executive Vice Chairman.
The Non-Executive Vice Chairman shall perform such duties as shall be
prescribed by the Board of Directors.
SECTION 9. President and Chief Executive Officer.
The President shall be the chief executive officer of the corporation and
shall have, subject to the control of the Board of Directors, the general
executive responsibility for the management and direction of the business and
affairs of the corporation, and the general supervision of its officers,
employees and agents. He shall have the power to appoint any and all
officers, employees and agents of the corporation not required by these
by-laws to be elected by the Board of Directors or not otherwise elected by
the Board of Directors in its discretion. He shall have the power to accept
the resignation of or to discharge any and all officers, employees and agents
of the corporation not elected by the Board of Directors. He shall sign all
papers and documents to which his signature may be necessary or appropriate
and shall have such other powers and duties as shall devolve upon the chief
executive officer of a corporation, and such further powers and duties as may
be prescribed for him by the Board of Directors.
SECTION 10. Vice President and Chief Financial Officer.
The Vice President and Chief Financial Officer shall have responsibility
for development and administration of the corporation's financial plans and
all financial arrangements, its insurance programs, its cash deposits and
shortterm investments, its accounting policies, and its federal and state tax
returns. Such officer shall also be responsible for the corporation's
internal control procedures and for its relationship with the financial
community.
SECTION 11. Vice President, Law.
The Vice President, Law shall be the chief legal advisor of the
corporation and shall have charge of the management of the legal affairs and
litigation of the corporation.
SECTION 12. Secretary.
The Secretary shall record the proceedings of the meetings of the
stockholders and directors, in one or more books kept for that purpose; see
that all notices are duly given in accordance with the provisions of the
By-Laws or as required by law; have charge of the corporate records and of the
seal of the corporation; affix the seal of the corporation or a facsimile
thereof, or cause it to be affixed, to all certificates for shares prior to
the issue thereof and to all documents the execution of which on behalf of the
corporation under its seal is duly authorized by the Board of Directors or
otherwise in accordance with the provisions of the By-Laws; keep a register of
the post office address of each stockholder, director or member, sign with the
Chairman of the Board or President, certificates for shares of stock of the
corporation, the issuance of which shall have been duly authorized by
resolution of the Board of Directors; have general charge of the stock
transfer books of the corporation; and in general, perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board, the
President or the Vice President, Law.
SECTION 13. Treasurer.
The Treasurer shall have the responsibility for the custody and
safekeeping of all funds of the corporation and shall have charge of their
collection, receipt and disbursement; shall receive and have authority to sign
receipts for all monies paid to the corporation and shall deposit the same in
the name and to the credit of the corporation in such banks or depositories as
the Board of Directors shall approve; shall endorse for collection on behalf
of the corporation all checks, drafts, notes and other obligations payable to
the corporation; shall sign or countersign all notes, endorsements, guaranties
and acceptances made on behalf of the corporation when and as directed by the
Board of Directors; shall give bond for the faithful discharge of his duties
in such sum and with such surety or sureties as the Board of Directors may
require; shall have the responsibility for the custody and safekeeping of all
securities of the corporation; and in general shall have such other powers and
perform such other duties as are incident to the office of Treasurer and as
from time to time may be prescribed by the Board of Directors or be delegated
to him by the Chairman of the Board, the President or the Vice President,
Finance.
SECTION 14. Absence or Disability of Officers.
In the absence or disability of the Chairman of the Board or the
President, the Board of Directors may designate, by resolution, individuals to
perform the duties of those absent or disabled. The Board of Directors may
also delegate this power to a committee or to a senior corporate officer.
<PAGE>
ARTICLE VI.
STOCK CERTIFICATES AND TRANSFER THEREOF
SECTION 1. Stock Certificates.
Except as otherwise permitted by statute, the Certificate of
Incorporation or resolution or resolutions of the Board of Directors, every
holder of stock in the corporation shall be entitled to have a certificate,
signed by or in the name of the corporation by the Chairman of the Board, the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares, and the class and series thereof, owned by him in the
corporation. Any and all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
SECTION 2. Transfer of Stock.
Transfer of shares of the capital stock of the corporation shall be made
only on the books of the corporation by the holder thereof, or by his attorney
there unto duty authorized, and on surrender of the certificate or
certificates for such shares. A person in whose name shares of stock stand on
the books of the corporation shall be deemed the owner thereof as regards the
corporation, and the corporation shall not, except as expressly required by
statute, be bound to recognize any equitable or other claim to, or interest
in, such shares on the part of any other person whether or not it shall have
express or other notice thereof.
SECTION 3. Transfer Agent and Registrar.
The corporation shall at all times maintain a transfer office or agency
in the Borough of Manhattan, The City of New York, in charge of a transfer
agent designated by the Board of Directors (who shall have custody, subject to
the direction of the Secretary, of the original stock ledger and stock records
of the corporation), where the shares of the capital stock of the corporation
of each class shall be transferable, and also a registry office in the Borough
of Manhattan, The City of New York, other than its transfer office or agency
in said city, in charge of a registrar designated by the Board of Directors,
where its stock of each class shall be registered. The corporation may, in
addition to the said offices, if and whenever the Board of Directors shall so
determine, maintain in such place or places as the Board shall determine, one
or more additional transfer offices or agencies, each in charge of a transfer
agent designated by the Board, where the shares of capital stock of the
corporation of any class or classes shall be transferable, and also one or
more additional registry offices, each in charge of a registrar designated by
the Board of Directors, where such shares of stock of any class or classes
shall be registered. Except as otherwise provided by resolution of the Board
of Directors in respect of temporary certificates, no certificates for shares
of capital stock of the corporation shall be valid unless countersigned by a
transfer agent and registered by a registrant authorized as aforesaid.
SECTION 4. Additional Regulations.
The Board of Directors may make such additional rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
SECTION 5. Lost, Destroyed or Mutilated Certificates.
The Board of Directors may provide for the issuance of new certificates
of stock to replace certificates of stock lost, stolen, mutilated or
destroyed, or alleged to be lost, stolen, mutilated or destroyed, upon such
terms and in accordance with such procedures as the Board of Directors shall
deem proper and prescribe.
<PAGE>
SECTION 6. Record Date.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
Except as otherwise provided by statute or the Certificate of
Incorporation, the Board of Directors may declare dividends upon the shares of
its capital stock either (1) out of its surplus, or (2) in case there shall be
no surplus, out of its net profits for the fiscal year, whenever, and in such
amounts as, in its opinion, the condition of the affairs of the corporation
shall render it advisable. Dividends may be paid in cash, in property or in
shares of the capital stock of the corporation.
ARTICLE VIII.
SEAL
The Board of Directors shall adopt a suitable corporate seal which shall
be in the form imprinted hereon. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner
reproduced.
ARTICLE IX.
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January of each year.
ARTICLE X.
INDEMNIFICATION
SECTION 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a
party to or is involved (including, without limitation, as a witness) in any
actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the full extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), or by other applicable law as
then in effect, against all expense, liability and loss (including attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid
in settlement) actually and reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators, provided, however, that except as provided in Section 2 of
this Article with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to indemnification
conferred in this Section shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee while a director or
officer, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking, by or
on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that such indemnitee is not entitled to be
indemnified under this Section 1, or otherwise.
SECTION 2. Right of Indemnitee to Bring Suit.
If a claim under Section 1 of this Article is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, to the extent successful in whole or in part, the
indemnitee shall be entitled to be paid also the expense of prosecuting such
suit. The indemnitee shall be presumed to be entitled to indemnification
under this Article upon submission of a written claim (and, in an action
brought to enforce a claim for an advancement of expenses where the required
undertaking, if any is required, has been tendered to the Corporation), and
thereafter the Corporation shall have the burden of proof to overcome the
presumption that the indemnitee is not so entitled. Neither the failure of
the Corporation (including its Board of Directors, independent legal counsel
or its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the
circumstances not an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit
or create a presumption that the indemnitee is not so entitled.
SECTION 3. Nonexclusivity of Rights.
The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 4. Insurance, Contracts and Funding.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
the Delaware General Corporation Law. The Corporation may enter into
contracts with any indemnitee in furtherance of the provisions of this Article
and may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article.
SECTION 5. Definition of Director and Officer.
Any person who is or was serving as a director of a wholly owned
subsidiary of the Corporation shall be deemed, for purposes of this Article
only, to be a director or officer of the Corporation entitled to
indemnification under this Article.
<PAGE>
SECTION 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, by action of its Board of Directors from time to
time, grant rights to indemnification and advancement of expenses to employees
and agents of the Corporation with the same scope and effects as the
provisions of this Article with respect to the indemnification and advancement
of expenses of directors and officers of the Corporation.
ARTICLE XI.
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Checks, Drafts, Etc.; Loans.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall, from time to time, be determined by resolution of the
Board of Directors. No loans shall be contracted on behalf of the corporation
unless authorized by the Board of Directors. Such authority may be general or
confined to specific circumstances.
SECTION 2. Deposits.
All funds of the Corporation shall be deposited, from time to time, to
the Credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may select, or as may be selected by
any officer or officers, agent or agents of the corporation to whom such power
may, from time to time, be delegated by the Board of Directors; and for the
purpose of such deposit, the Chairman, the President, any Vice President, the
Treasurer or any Assistant Treasurer, the Secretary or any Assistant Secretary
or any other officer or agent to whom such power may be delegated by the Board
of Directors, may endorse, assign and deliver checks, drafts and other order
for the payment of money which are payable to the order of the corporation.
ARTICLE XII.
NOMINATIONS OF DIRECTOR CANDIDATES
SECTION 1. General. Nomination of candidates for election as directors
of the corporation at any meeting of stockholders called for election of
directors (an "Election Meeting") may be made by the Board of Directors or by
any stockholder entitled to vote at such Election Meeting.
SECTION 2. Nominations by Board of Directors. Nominations made by the
Board of Directors shall be made at a meeting of the Board of Directors, or by
written consent of directors in lieu of a meeting, not less than 30 days prior
to the date of the Election Meeting. At the request of the Secretary of the
corporation each proposed nominee shall provide the corporation with such
information concerning himself as is required, under the rules of the
Securities and Exchange Commission, to be included in the corporation's proxy
statement soliciting proxies for his election as a director.
SECTION 3. Nominations by Stockholders. Not less than 50 days nor more
than 75 days prior to the date of the Election Meeting any stockholder who
intends to make a nomination at the Election Meeting shall deliver a notice to
the Secretary of the corporation setting forth (a) as to each nominee whom the
stockholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the nominee, (ii) the
principal occupation or employment of the nominee, (iii) the class and number
of shares of capital stock of the corporation which are beneficially owned by
the nominee and (iv) any other information concerning the nominee that would
be required, under the rules of the Securities and Exchange Commission, in a
proxy statement soliciting proxies for the election of such nominee; and (b)
as to the stockholder giving the notice, (i) the name and record address of
the stockholder and (ii) the class and number of shares of capital stock of
the corporation which are beneficially owned by the stockholder; provided,
however, that in the event that less than 65 days' notice or prior public
disclosure of the date of the Election Meeting is given or made to
stockholders, notice by the stockholder to be timely must be so delivered not
later than the close of business on the 15th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made, whichever first occurs. Such notice shall include a signed consent
to serve as a director of the corporation, if elected, of each such nominee.
The corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the
corporation.
SECTION 4. Substitute Nominees. In the event that a person is validly
designated as a nominee in accordance with Section 2 or Section 3 of this
Article XII and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the stockholder
who proposed such nominee, as the case may be, may designate a substitute
nominee.
SECTION 5. Void Nominations. If the Chairman of the Election Meeting
determines that a nomination was not made in accordance with the foregoing
procedures, such nomination shall be void.
ARTICLE XIII.
AMENDMENTS
These By-Laws may be altered or repealed and new By-Laws may be made by
the affirmative vote, at any meeting of the Board, of a majority of the whole
Board of Directors, subject to the rights of the stockholders of the
Corporation to amend or repeal By-Laws made or amended by the Board of
Directors by the affirmative vote of the holders of record of a majority in
number of shares of the outstanding stock of the Corporation present or
represented at any meeting of the stockholders and entitled to vote thereon,
provided that notice of the proposed action be included in the notice of such
meeting.
Exhibit 4
CERTIFICATE OF DESIGNATION
OF
6 1/4% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES A, $0.01 PAR VALUE
OF
BURLINGTON NORTHERN SANTA FE CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
BURLINGTON NORTHERN SANTA FE CORPORATION, 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 11, 1995, there hereby is created, out of the
25,000,000 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.
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, $0.01 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 cancelled. 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, 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 6q% 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 6q%
Preferred Stock.
SECTION 9. NO PREEMPTIVE RIGHTS. No holder of shares of the 6q%
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.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by Douglas J. Babb its President, and attested by
Jeffrey Moreland its Vice President and Secretary this September 11, 1995.
BURLINGTON NORTHERN SANTA FE
CORPORATION
By: /s/ Douglas J. Babb
Attested:
By: /s/ Jeffrey Moreland
EXHIBIT 11
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
------- -------- ------- --------
Net income
- -----------------------------------------
<S> <C> <C> <C> <C>
Primary:
Net income $ 139 $ 115 $ 377 $ 274
Convertible preferred stock dividends (5) (5) (16) (16)
------- -------- ------- --------
Net income available for common
stockholders $ 134 $ 110 $ 361 $ 258
======= ======== ======= ========
Fully diluted:
Net income $ 139 $ 115 $ 377 $ 274
======= ======== ======= ========
Weighted average number of shares
- -----------------------------------------
Primary:
Average common shares outstanding 94.9 89.3 91.3 89.1
Common share equivalents resulting
from assumed exercise of stock
options 2.0 0.9 1.4 1.1
------- -------- ------- --------
96.9 90.2 92.7 90.2
======= ======== ======= ========
Fully diluted:
Average common shares outstanding 94.9 89.2 91.3 89.1
Common shares resulting from assumed
conversion of convertible preferred
stock 7.3 7.4 7.3 7.4
Common share equivalents resulting
from assumed exercise of stock
options assuming full dilution 2.1 0.9 1.9 1.1
------- -------- ------- --------
104.3 97.5 100.5 97.6
======= ======== ======= ========
Earnings per common share
- -----------------------------------------
Primary $ 1.38 $ 1.22 $ 3.90 $ 2.86
Fully diluted 1.34 1.18 3.76 2.81
</TABLE>
Primary earnings per common share are computed by dividing net income, after
deduction of preferred stock dividends, by the weighted average number of
common shares and common share equivalents outstanding. Fully diluted
earnings per common share are computed by dividing net income by the weighted
average number of common shares and common share equivalents outstanding.
Common share equivalents are computed using the treasury stock method. An
average market price is used to determine the number of common share
equivalents for primary earnings per common share. The higher of the average
or end-of-period market price is used to determine common share equivalents
for fully diluted earnings per common share. In addition, the if-converted
method is used for convertible preferred stock when computing fully diluted
earnings per common share. The average number of common shares used for
earnings per share calculations through September 30, 1995 reflect the effect
of common shares issued in connection with the September 22, 1995 merger with
SFP as outstanding for only nine days. Future calculations will therefore
reflect a significant increase in the number of outstanding common shares.
Earnings per common share may not compute due to the level of rounding in this
exhibit.
EXHIBIT 12
BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
------- ------- ------- -------
Earnings:
<S> <C> <C> <C> <C>
Pre-tax income $ 229 $ 188 $ 619 $ 464
Add:
Interest and fixed charges,
excluding capitalized interest 52 40 145 118
Portion of rent under long-term
operating leases representative
of an interest factor 30 25 85 77
Deduct:
Undistributed equity in earnings
of investments accounted for
under the equity method (18) - (18) -
------- ------- ------- -------
Total earnings available for fixed
charges $ 293 $ 253 $ 831 $ 659
======= ======= ======= =======
Fixed charges:
Interest and fixed charges $ 53 $ 40 $ 148 $ 119
Portion of rent under long-term
operating leases representative
of an interest factor 30 25 85 77
------- ------- ------- -------
Total fixed charges $ 83 $ 65 $ 233 $ 196
======= ======= ======= =======
Ratio of earnings to fixed charges 3.53x 3.89x 3.57x 3.36x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information from Burlington Northern Santa Fe
Corporation'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> 62
<SECURITIES> 0
<RECEIVABLES> 820
<ALLOWANCES> 54
<INVENTORY> 218
<CURRENT-ASSETS> 1414
<PP&E> 20008
<DEPRECIATION> 3989
<TOTAL-ASSETS> 18355
<CURRENT-LIABILITIES> 2286
<BONDS> 4164
<COMMON> 4251<F2>
0
336<F2>
<OTHER-SE> 771
<TOTAL-LIABILITY-AND-EQUITY> 18355
<SALES> 0
<TOTAL-REVENUES> 4091
<CGS> 0
<TOTAL-COSTS> 3358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 145
<INCOME-PRETAX> 619
<INCOME-TAX> 242
<INCOME-CONTINUING> 377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 377
<EPS-PRIMARY> 3.90
<EPS-DILUTED> 3.76
<FN>
<F1>Provision for doubtful accounts is included in total costs.
<F2>Includes the respective additional paid-in capital.
</FN>
</TABLE>
