<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
BURLINGTON NORTHERN SANTA FE CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4) Date Filed:
Notes:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
BURLINGTON NORTHERN SANTA FE CORPORATION
[BNSF LOGO]
The fifth annual meeting of shareholders of Burlington Northern Santa Fe
Corporation ("Burlington Northern Santa Fe" or the "Company") will be held
at 2:00 p.m. on Wednesday, April 19, 2000, at the Fort Worth Club, 306 W.
7th Street, Fort Worth, Texas, for the following purposes:
(1) to elect fourteen directors; and
(2) to transact such other business as is properly brought before the
meeting and at any adjournment or postponement of the meeting,
including the shareholder proposal included in the accompanying
proxy statement and those referred to under "Other Business," if
these proposals are presented at the meeting and are in order.
Shareholders of record at the close of business on March 13, 2000, are
entitled to notice of the meeting and are entitled to vote at the meeting in
person or by proxy. A list of these stockholders will be kept at the offices
of the Company in Fort Worth, Texas for a period of ten days prior to the
meeting. You may authorize BNSF to vote your shares as you direct using the
enclosed proxy card.
By order of the Board of Directors.
/s/ Marsha K. Morgan
Marsha K. Morgan
Vice President-Investor
Relations and Corporate
Secretary
2650 Lou Menk Drive
Fort Worth, Texas 76131-2830
March 23, 2000
YOUR VOTE IS IMPORTANT. Please mark, sign, and date your proxy card and
return it promptly in the enclosed postage-paid envelope, whether or not you
plan to attend the meeting.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT FOR 2000 ANNUAL MEETING OF SHAREHOLDERS.................... 1
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING............................ 1
2000 Annual Meeting...................................................... 1
Vote Necessary to Approve Annual Meeting Proposals....................... 2
Proxies and Voting....................................................... 2
ELECTION OF DIRECTORS...................................................... 4
Annual Election.......................................................... 4
Nominees................................................................. 4
OTHER ANNUAL MEETING INFORMATION........................................... 7
Independent Public Accountants........................................... 7
Advance Notice Procedures................................................ 7
Section 16(a) Beneficial Ownership Reporting Compliance.................. 7
GOVERNANCE OF THE COMPANY.................................................. 8
Role of the Board........................................................ 8
Board Structure.......................................................... 8
1999 Board Meetings...................................................... 8
Board Committees......................................................... 8
Directors' Compensation.................................................. 9
Directors' Retirement and Stock Plans.................................... 9
Retirement Policy........................................................ 10
Certain Relationships.................................................... 10
STOCK OWNERSHIP IN THE COMPANY............................................. 11
Certain Beneficial Owners................................................ 11
Ownership of Management.................................................. 12
COMPENSATION COMMITTEE REPORT ON 1999 EXECUTIVE COMPENSATION............... 13
Compensation Committee................................................... 13
BNSF Vision.............................................................. 13
Philosophies and Objectives ............................................. 13
Competitive Compensation Objectives...................................... 14
Annual Cash Compensation................................................. 14
Long-Term Incentives..................................................... 15
CEO Compensation......................................................... 16
Policy on Deductibility of Compensation.................................. 17
PERFORMANCE GRAPH.......................................................... 18
EXECUTIVE COMPENSATION..................................................... 19
Summary Compensation Table............................................... 19
Stock Option Grants in 1999.............................................. 20
Aggregated 1999 Stock Option Exercises and Year-End Option Values........ 22
Pension Plans............................................................ 22
Employment Contracts and Change in Control Arrangements.................. 23
Trust Agreements......................................................... 25
SHAREHOLDER PROPOSAL....................................................... 25
OTHER BUSINESS............................................................. 26
</TABLE>
<PAGE>
Burlington Northern Santa Fe Corporation
2650 Lou Menk Drive
Fort Worth, Texas 76131-2830
March 23, 2000
- --------------------------------------------------------------------------------
PROXY STATEMENT FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your common stock to be represented at the fifth
annual meeting of shareholders by the proxies named in the enclosed proxy card.
We are first mailing this proxy statement and the form of proxy on or about
March 23, 2000.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
2000 Annual Meeting
Time and Place: Wednesday, April 19, 2000
2:00 p.m., Central Time
Fort Worth Club
306 West 7th Street
Fort Worth, Texas
- --------------------------------------------------------------------------------
Purpose of Meeting is to 1. The election of fourteen directors; and
Vote on the Following
Items: 2. to consider such other business as is
properly brought before the meeting and at
any adjournment or postponement of the
meeting, including the shareholder proposal
described in this proxy statement and those
referred to in "Other Business," if these
proposals are presented at the meeting and
are in order.
- --------------------------------------------------------------------------------
Record Date: The record date for shares entitled to vote is
March 13, 2000.
- --------------------------------------------------------------------------------
Outstanding Shares as of As of February 29, 2000, there were 441,954,657
February 29, 2000: shares of Burlington Northern Santa Fe common
stock outstanding and entitled to vote.
- --------------------------------------------------------------------------------
Securities Entitled to Shares entitled to vote are shares of Burlington
Vote: Northern Santa Fe common stock outstanding at the
close of business on the record date.
Each share of Burlington Northern Santa Fe common
stock that you own entitles you to one vote.
Shares held by Burlington Northern Santa Fe in
its treasury are not voted.
- --------------------------------------------------------------------------------
Quorum Requirement: A quorum of shareholders is necessary to hold a
valid meeting.
The presence in person or by proxy at the meeting
of holders of shares representing at least a
majority of the votes of the Burlington Northern
Santa Fe common stock entitled to vote at the
meeting is a quorum. Abstentions and broker "non-
votes" count as present for establishing a
quorum. Shares held by Burlington Northern Santa
Fe in its treasury do not count toward a quorum.
A broker "non-vote" occurs on an item when a
broker is not permitted to vote on that item
without instruction from the beneficial owner of
the shares and no instruction is given.
- --------------------------------------------------------------------------------
Shares Beneficially Approximately 5,881,373 shares of Burlington
Owned by Burlington Northern Santa Fe common stock are owned by
Northern Santa Fe directors and executive officers, including
Directors and Executive shares which may be acquired within 60 days upon
Officers as of February the exercise of stock options. These securities
29, 2000: represent in total approximately 1.3% of the
voting power of Burlington Northern Santa Fe's
voting securities.
These individuals have indicated that they will
vote in favor of the nominees for election as
directors identified on pages 4-6 and, if
presented at the meeting, against the shareholder
proposal described on pages 25-26.
1
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Vote Necessary to Approve Annual Meeting Proposals
Vote Necessary to Approve Annual Meeting Proposals
Item Vote Necessary
- --------------------------------------------------------------------------------
I. Election of Directors A plurality of the votes of the shares present in
person or represented by proxy at the meeting and
entitled to vote. The fourteen nominees having
the greatest number of votes will be elected.
- --------------------------------------------------------------------------------
II. All Other Matters, Majority of the votes of the shares present in
Including the person or represented by proxy at the meeting and
Shareholder Proposals entitled to vote.
Described in this Proxy
Statement, if Presented
and in Order
Proxies and Voting
Voting Your Proxy. You may vote in person at the meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxyholder will vote your shares as you have directed. You may vote for
or against any proposal or abstain from voting. In voting to elect Burlington
Northern Santa Fe directors, you may vote for (1) all of the nominees for
director, (2) none of the nominees for director or (3) all of the nominees for
director, except those you designate. Please complete, sign, date and return
the enclosed proxy card in the enclosed postage-paid envelope provided as soon
as possible.
If you submit your proxy but do not make specific choices, your proxyholder
will vote your shares:
. "FOR" the election of each nominee for director identified on pages 4-6
. "AGAINST" the shareholder proposal described on pages 25-26, if the
proposal is presented at the meeting
. In its discretion as to other business that properly comes before the
meeting or at any adjournment or postponement of the meeting
2
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Proxies and Voting
Revoking Your Proxy. You may revoke your proxy before it is voted by:
. submitting a new proxy with a later date;
. notifying the Company's Corporate Secretary in writing before the
meeting that you have revoked your proxy;
. voting in person at the meeting.
Voting in person. If you plan to attend the meeting and wish to vote in
person, you may vote by ballot at the meeting. However, if your shares are held
in the name of your broker, bank or other nominee, you must bring an account
statement or letter from the nominee indicating that you are the beneficial
owner of the shares on March 13, 2000, the record date for voting.
Burlington Northern Santa Fe 401(k) Savings Plans. If you participate in one
of Burlington Northern Santa Fe's 401(k) savings plans, your proxy card permits
you to direct the trustee how to vote the number of shares allocated to your
account. The trustees of Burlington Northern Santa Fe's 401(k) savings plans
also vote allocated shares of Burlington Northern Santa Fe common stock for
which the trustees have not received direction in the same proportion as
directed shares are voted.
Dividend Reinvestment Plan. Shares held for the account of persons
participating in the Company's dividend reinvestment plan will be voted
automatically in accordance with the vote indicated by the shareholder of
record on the proxy. If no choice is indicated, both record shares and shares
held in the Company's dividend reinvestment plan will be voted "FOR" the
election of our nominees for director, and "AGAINST" the shareholder proposal
described on pages 25-26, if the proposal is presented at the meeting. If the
shareholder does not vote the shares held of record, the individual's shares
held in the dividend reinvestment account will not be voted.
Inspectors of Election. Representatives of EquiServe, First Chicago Trust
division, will tabulate the votes and act as inspectors of election.
People with disabilities. We can provide reasonable assistance to help you
participate in the meeting if you tell us about your disability and your plan
to attend. Please call or write our Corporate Secretary at least two weeks
before the meeting.
Proxy solicitation. We will pay our costs of soliciting proxies.
In addition to this mailing, Burlington Northern Santa Fe employees and
agents may solicit proxies personally, electronically, by telephone, or
otherwise. Burlington Northern Santa Fe is paying Georgeson Shareholder
Communications Inc. a fee of $15,500 plus expenses, to help with the
solicitation.
The extent to which these proxy soliciting efforts will be necessary depends
entirely upon how promptly proxies are submitted. You should send in your proxy
by mail without delay. We also reimburse brokers and other nominees for their
expenses in sending these materials to you and getting your voting
instructions.
Annual Meeting Admission. If you plan on attending the annual meeting,
please mark the indicated box on your proxy card. An admission card is included
if you are a shareholder of record; simply detach it from the proxy before
mailing and bring the admission card with you. If you are a beneficial owner of
stock held by a bank, broker or investment plan (with your stock held in
"street name"), an admission card in the form of a legal proxy will be sent to
you by your broker or other registered holder. If you do not receive the legal
proxy in time, you may be admitted to the meeting by showing your most recent
brokerage statement or other proof of ownership of our stock as of the record
date. Because seating is limited, admission will be limited to shareholders
with an admission card or other proof of ownership.
3
<PAGE>
Election of Directors
ELECTION OF DIRECTORS
Annual Election
At the annual meeting, you and the other shareholders will elect fourteen
directors, each to hold office for a term of one year and until his or her
successor has been elected and qualified. All incumbent directors, with the
exception of Ms. Martinez, initially became directors of the Company on
September 22, 1995, with the business combination of Burlington Northern Inc.
("BNI") and Santa Fe Pacific Corporation ("SFP") pursuant to the Agreement and
Plan of Merger dated June 29, 1994, as amended, among BNI, SFP and the Company.
Ms. Martinez was first elected in 1998. Pursuant to the Board's retirement
policy, Mr. Blanton, a director since 1989, will not stand for re-election. All
other incumbent directors have been nominated for re-election.
Nominees
The nominees for whom the shares represented by the enclosed proxy are
intended to be voted, unless such authority is withheld, are identified below
along with certain background information. We do not contemplate that any of
these nominees will be unavailable for election but, if such a situation should
arise, the proxy will be voted in accordance with the best judgment of the
named proxies unless you have directed otherwise. Years served as a director of
the Company includes prior service as directors of BNI, SFP and predecessor
companies. No director, other than Mr. Krebs, is or has been employed by or
served as an executive officer of the Company or its subsidiaries.
JOSEPH F. ALIBRANDI, 71 Director since 1982
Retired Chairman and Chief Executive Officer of Whittaker Corporation, Los
Angeles, California (aerospace) since August 1999. Previously, Chairman of
Whittaker Corporation from December 1985 to July 1999, also Chief Executive
Officer of Whittaker Corporation from November 1975 to December 1994, and from
September 1996 to August 1999. Also Chairman of BioWhittaker, Inc.
(biotechnology) from October 1991 to September 1997. Also a director of
Catellus Development Corporation and Jacobs Engineering Group Inc. Member of
Executive Committee and Compensation Committee.
JOHN J. BURNS, JR., 68 Director since 1995
President and Chief Executive Officer of Alleghany Corporation, New York, New
York (holding company with asset management, reinsurance, industrial minerals,
and steel fastener manufacturing operations, and an investment position in
Burlington Northern Santa Fe Corporation) since July 1992. Also a director of
Alleghany Corporation and Chicago Title Corporation. Member of Executive
Committee and Compensation Committee.
GEORGE DEUKMEJIAN, 71 Director since 1991
Senior Counsel to Sidley & Austin, Los Angeles, California (law firm) since
September 1999; previously, Partner of Sidley & Austin from February 1991.
Formerly, Governor of the State of California from January 1983 until January
1991. Also a director of Foundation Health Systems, Inc. and The Keith
Companies. Member of Audit Committee and Directors and Corporate Governance
Committee.
ROBERT D. KREBS, 57 Director since 1983
Chairman and Chief Executive Officer of the Company since June 1999. Also,
Chairman and Chief Executive Officer of The Burlington Northern and Santa Fe
Railway Company. Previously, Chairman, President and Chief Executive Officer of
the Company from April 1997 to June 1999, and President and Chief Executive
Officer from September 1995 to April 1997. Chairman, President and Chief
Executive Officer of Santa Fe Pacific Corporation from June 1988 to January
1998. Also a director of Phelps Dodge Corporation. Chairman of the Executive
Committee.
4
<PAGE>
Election of Directors
BILL M. LINDIG, 63 Director since 1993
Chairman of SYSCO Corporation, Houston, Texas (marketer and distributor of
foodservice products) since January 2000; previously, Chairman and Chief
Executive Officer of SYSCO Corporation from January 1999. From January 1995 to
January 1999, President and Chief Executive Officer, and from November 1985 to
January 1995, President and Chief Operating Officer, of SYSCO Corporation. Also
a director of SYSCO Corporation. Member of Compensation Committee and Directors
and Corporate Governance Committee.
VILMA S. MARTINEZ, 56 Director since 1998
Partner in Munger, Tolles & Olson LLP, Los Angeles, California (law firm) since
1982. Also a director of Anheuser-Busch Companies, Inc., Fluor Corporation,
Sanwa Bank California, and Shell Oil Company. Member of Audit Committee and
Directors and Corporate Governance Committee.
ROY S. ROBERTS, 60 Director since 1993
Group Vice President, North American Vehicle Sales, Service and Marketing of
General Motors Corporation, Detroit, Michigan (manufacturer of motor vehicles)
since July 1999; previously, Vice President and Group Executive, North American
Vehicle Sales, Service and Marketing of General Motors Corporation from October
1998. From August 1998 to October 1998, Vice President and General Manager,
Field Sales, Service and Parts; from February 1996 to August 1998, Vice
President and General Manager of Pontiac-GMC Division; and from October 1992 to
February 1996, General Manager, GMC Truck Division, of General Motors
Corporation. Also a director of Abbott Laboratories and Volvo Trucks North
America, Inc. Member of Compensation Committee and Directors and Corporate
Governance Committee.
MARC J. SHAPIRO, 52 Director since 1995
Vice Chairman for Finance, Risk Management and Administration of The Chase
Manhattan Corporation, New York, New York (banking) since July 1997.
Previously, Chairman and Chief Executive Officer, Chase Bank of Texas N.A.,
Houston, Texas (banking) since 1989. Also a director of Expedior Incorporated
and a trustee of Weingarten Realty Investors. Member of Audit Committee and
Directors and Corporate Governance Committee.
ARNOLD R. WEBER, 70 Director since 1986
President-Emeritus, Northwestern University, Evanston, Illinois (higher
education) since July 1998. From January 1995 through June 1998, Chancellor of
Northwestern University, and from February 1985 through December 1994,
President of Northwestern University. Also a director of PepsiCo, Inc., Tribune
Company, Aon Corporation, Diamond Technology Partners, Inc. and Deere &
Company. Member of Executive Committee and Audit Committee.
ROBERT H. WEST, 61 Director since 1980
Retired Chairman of the Board of Butler Manufacturing Company, Kansas City,
Missouri (manufacturer of pre-engineered building systems and specialty
components). Previously, Chairman of the Board of Butler Manufacturing Company
from January 1999 to July 1999, and Chairman and Chief Executive Officer from
May 1986 to January 1999. Also a director of Commerce Bancshares, Inc. and
Kansas City Power & Light Company. Chairman of Audit Committee and member of
Compensation Committee.
5
<PAGE>
Election of Directors
J. STEVEN WHISLER, 45 Director since 1995
President and Chief Executive Officer, Phelps Dodge Corporation, Phoenix,
Arizona (mining and manufacturing) since January 2000. Previously, President
and Chief Operating Officer of Phelps Dodge Corporation from December 1997 to
December 1999, and from October 1988 to December 1997, Senior Vice President of
Phelps Dodge Corporation. President of Phelps Dodge Mining Company, a division
of Phelps Dodge Corporation, from November 1991 to September 1998. Also a
director of Phelps Dodge Corporation and Southern Peru Copper Corporation.
Member of Audit Committee and Directors and Corporate Governance Committee.
EDWARD E. WHITACRE, JR., 58 Director since 1993
Chairman and Chief Executive Officer, SBC Communications Inc., San Antonio,
Texas (telecommunications) since January 1990. Also a director of Anheuser-
Busch Companies, Inc., Emerson Electric Co., The May Department Stores Company,
and SBC Communications Inc. Chairman of Directors and Corporate Governance
Committee and member of Executive Committee.
RONALD B. WOODARD, 56 Director since 1995
President and Chief Executive Officer of Magna Drive, Inc., Seattle, Washington
(industrial equipment manufacturing) since April 1999. Formerly, President of
Boeing Commercial Airplane Group, a division of The Boeing Company (aerospace),
from December 1993 to November 1998. From March 1993 to December 1993,
Executive Vice President-Boeing Commercial Airplane Group. Member of Audit
Committee and Compensation Committee.
MICHAEL B. YANNEY, 66 Director since 1989
Chairman and Chief Executive Officer, America First Companies L.L.C., Omaha,
Nebraska (investments) since 1984. Also a director of Forest Oil Corporation,
Inc., Level 3 Communications, Inc. and RCN Corporation. Chairman of
Compensation Committee and member of Executive Committee.
6
<PAGE>
Other Annual Meeting Information
OTHER ANNUAL MEETING INFORMATION
Independent Public Accountants
PricewaterhouseCoopers LLP served as the independent public accountant for
the Company in 1999. The Company's independent public accountant for 2000 will
be selected by the Board at a regular Board meeting to be held in 2000.
Representatives of PricewaterhouseCoopers LLP will be present at the annual
meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
Advance Notice Procedures
Shareholder Proposals for Annual Meeting in 2001
Proposals by shareholders to be considered for inclusion in the proxy
materials solicited by the directors for the annual meeting in 2001 must be
received by the Corporate Secretary, 2650 Lou Menk Drive, Second Floor, Fort
Worth, Texas 76131-2830, no later than November 23, 2000. The use of certified
mail, return receipt requested, is advised. To be eligible for inclusion, a
proposal must also comply with Rule 14a-8 and all other applicable provisions
of Regulation 14A under the Securities Exchange Act of 1934.
Other Shareholder Business at Annual Meeting in 2001
For other business to be introduced at the annual meeting in 2001, including
proposals not submitted pursuant to Rule 14a-8 for inclusion in our proxy
materials, shareholders must send advance notice in writing to the Corporate
Secretary. To be timely, notice must be received no later than December 20,
2000 and no earlier than November 20, 2000. The advance notice must also meet
the other requirements of Article II, Section 10 of the Company's By-Laws. You
may obtain a copy of our By-Laws by writing to our Corporate Secretary, Marsha
K. Morgan.
Shareholder Nomination of Directors
The Directors and Corporate Governance Committee will consider candidates
for election as a director as recommended by shareholders. Any such
recommendation, together with the person's qualifications and consent to be
considered as a nominee, should be sent in writing to our Corporate Secretary
on or before November 30 of the year preceding the annual meeting to permit
adequate time for review by the Committee.
Shareholders intending to nominate a candidate for election as a director at
the annual meeting in 2001 must give advance notice in writing to the Corporate
Secretary. To be timely, notice must be received no later than December 20,
2000 and no earlier than November 20, 2000. The advance notice must also meet
the other requirements of Article XII, Section 3 of the Company's By-Laws.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors
and executive officers to file reports of holdings and transactions in the
Company's common stock with the Securities and Exchange Commission. Based on
Company records and representations from these persons, the Company believes
that all Securities and Exchange Commission beneficial ownership reporting
requirements for 1999 were met.
7
<PAGE>
Governance of the Company
GOVERNANCE OF THE COMPANY
Role of the Board
Pursuant to the Delaware General Corporation Law, the business, property and
affairs of the Company are managed under the direction of the Board of
Directors. The Board has responsibility for establishing broad corporate
policies and for the overall performance and direction of the Company, but is
not involved in day-to-day operations. Members of the Board keep informed of
the Company's business by participating in Board and committee meetings, by
reviewing analyses and reports sent to them regularly, and through discussions
with the Chairman and Chief Executive Officer and other officers.
Board Structure
The Company currently has fifteen directors. With the retirement of Director
Jack S. Blanton as of the annual meeting pursuant to the Board's retirement
policy, the size of the Board will be reduced to fourteen. Each Director is
elected to a one-year term.
1999 Board Meetings
In 1999, the Board met eleven times. Each incumbent member of the Board
attended 85% or more of the aggregate of the total number of meetings of the
Board and the total number of meetings held by all committees of the Board on
which he or she served. Average attendance at Board and committee meetings for
all directors was over 96%.
Board Committees
The Board has established Executive, Compensation, Directors and Corporate
Governance, and Audit Committees. No member of any committee is presently an
employee of the Company or its subsidiaries with the exception of Mr. Krebs,
who serves as Chairman of the Executive Committee.
The Executive Committee did not meet during 1999. The committee exercises
the authority of the Board during intervals between meetings of the Board
subject to certain limitations of Delaware law.
The Compensation Committee met four times during 1999. The committee reviews
and makes recommendations to the Board concerning:
. the compensation of the Chairman and Chief Executive Officer and other
senior officers of the Company;
. performance of fiduciaries for the Company's pension trust funds;
. proposed employee benefit and stock plans, and Company compensation
systems and practices;
. the evaluation of the performance of the Company's officers and the
selection of individuals for appointment or promotion as officers; and
. grants of stock awards.
The Directors and Corporate Governance Committee met three times during
1999. The committee reviews and makes recommendations to the Board concerning:
. the size and composition of the Board;
. nominees for election as directors;
. evaluation of the performance of the Board;
8
<PAGE>
Governance of the Company
. compensation and benefits for directors; and
. nominations of candidates for election as director recommended by
stockholders.
The Audit Committee met three times during 1999. The functions of the
committee are:
. to oversee the Company's accounting, auditing and financial policies and
practices and its internal control policies and procedures;
. to recommend to the Board the engagement of an independent accounting
firm; and
. to review with management and the independent public accountant the
Company's financial statements, basic accounting and financial policies
and practices, audit scope and competence of control personnel.
Directors' Compensation
We pay non-employee directors an annual retainer fee of $36,000, in
quarterly installments. We pay each Committee Chairman a supplemental annual
retainer fee of $5,000. In addition, for attendance at each Board or Committee
meeting or any inspection trip or similar meeting, we pay a meeting fee of
$1,000 plus expenses. Dr. Weber also receives $10,000 annually for his services
as an economic advisor to the Board. Directors who are also officers or
employees of the Company receive no compensation for their duties performed as
a director of the Company.
Directors' Retirement and Stock Plans
Burlington Northern Santa Fe Directors' Retirement Plan. Non-employee Board
members are eligible for an annual benefit under the Directors' Retirement Plan
if they have served as a member of the Board for ten consecutive years, have
attained mandatory retirement age or are designated by the Directors and
Corporate Governance Committee as eligible for benefits. The annual benefit is
the amount of the annual retainer fee for services as a Board member at the
time of termination of service; the benefit ceases upon an individual's death.
Service as a member of the boards of BNSF's predecessor companies counts toward
the ten consecutive years of service requirement.
Burlington Northern Santa Fe Non-Employee Directors' Stock Plan. In 1999,
each non-employee director was granted non-qualified stock options to purchase
3,000 shares of Company common stock at $35.125 per share, the fair market
value on the date of grant. These options vest on April 15, 2000 (unless
earlier terminated pursuant to the plan) and expire on April 15, 2009, or
earlier if a director leaves the Board. Each individual (other than employees)
elected to the Board of Directors at the 2000 annual meeting and at each
subsequent annual meeting will automatically be granted non-qualified stock
options to purchase 3,000 shares of the Company's common stock (subject to
adjustment as provided in the Non-Employee Directors' Stock Plan) at 100% of
the fair market value of such shares on the date that the options are granted.
Each option will become exercisable commencing on the first anniversary date of
the grant and will terminate no later than ten years from the date of grant.
At each annual meeting, each newly-elected director who has not previously
received such an award will also be granted a one-time Retainer Stock Award of
3,000 restricted shares of common stock pursuant to the Non-Employee Directors'
Stock Plan. These shares vest ratably upon the third, fourth and fifth
anniversary of the award subject to the attainment of a 12% compound annual
growth rate in the fair market value of a share of common stock (as defined in
the plan) maintained for a 30 consecutive trading day period immediately prior
to or following the respective anniversary date. To the extent that an award
has not vested previously, it will be forfeited six years from the date of
grant.
9
<PAGE>
Governance of the Company
The Non-Employee Directors' Stock Plan also permits directors by timely
election to forego up to 25% of their annual retainer and receive a Retainer
Stock Award in the form of restricted stock of 150% of the amount foregone
based on the fair market value of the Company's common stock on the date of
grant (December 31 of each calendar year), to vest three years from the date of
grant. In 1999, 14 directors each received a Retainer Stock Award of 556
restricted shares after electing to forego 25% of their annual retainer.
Burlington Northern Santa Fe Deferred Compensation Plan for Directors. Non-
employee directors may voluntarily defer a portion or all of the fees they
would otherwise receive into a Prime Rate interest account, a Company phantom
stock account or other investment option established under the plan's terms.
Distributions are made in either annual installments or as a lump sum after
service as a director ceases. The Company has assumed all obligations incurred
through September 22, 1995 under the BNI Deferred Compensation Plan for
Directors, a predecessor plan.
Retirement Policy
Under the Board's corporate governance standards, no individual may serve as
a director beyond the annual meeting of shareholders on or following his or her
seventy-second birthday. Individual directors who change the responsibility
they held when they were elected to the Board should volunteer to resign from
the Board to afford the Board the opportunity, via the Directors and Corporate
Governance Committee, to review the continued appropriateness of Board
membership under the circumstances. The Board's corporate governance standards
call for a director who is also an employee of the Company to retire from the
Board upon his or her termination of employment.
Certain Relationships
Mr. Deukmejian is a Senior Counsel to the Sidley & Austin law firm, which
firm provided legal services to the Company in 1999 and is providing legal
services to the Company in 2000.
10
<PAGE>
Stock Ownership in the Company
STOCK OWNERSHIP IN THE COMPANY
Certain Beneficial Owners
To the best of the Company's knowledge based on filings with the Securities
and Exchange Commission, the following are the only persons who own
beneficially five percent or more of its common stock outstanding:
<TABLE>
<CAPTION>
Shares Held
and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percentage(3)
- ------------------------------------ -------------------- -------------
<S> <C> <C>
FMR Corp. .................................. 48,698,205(1) 10.657%
82 Devonshire Street
Boston, MA 02109
UBS AG...................................... 27,542,355(2) 5.9%(2)
Bahnhofstrasse 45
8021, Zurich, Switzerland
and
Brinson Partners, Inc.
209 LaSalle Street
Chicago, IL 60604-1295
</TABLE>
- --------
(1) Based on share holdings reported in Schedule 13G, dated February 14, 2000,
pursuant to the Securities Exchange Act of 1934 and provided to the
Company for holdings as of December 31, 1999. The Schedule 13G indicates
that of the total shares held, the reporting person had sole power to vote
or direct the vote for 4,880,603 shares and shared power to vote or direct
the vote for no shares, and had sole power to dispose or to direct the
disposition of 48,698,205 shares.
(2) Based on share holdings reported in a joint filing on Schedule 13G dated
February 11, 2000, pursuant to the Securities Exchange Act of 1934 and
provided to the Company for holdings as of December 31, 1999. The Schedule
13G indicates that of the total shares held, UBS AG had sole voting power
for 26,787,254 shares and shared dispositive power for 27,542,355 shares,
or 5.9%, and its wholly owned indirect subsidiary, Brinson Partners, Inc.,
had sole voting power and shared dispositive power for 26,177,263 shares,
or 5.6%. In the filing, UBS AG and Brinson Partners, Inc. disclaim
beneficial ownership of these securities.
(3) Based on 454,559,590 shares of common stock of the Company outstanding as
of December 31, 1999.
11
<PAGE>
Stock Ownership in the Company
Ownership of Management
The following table shows, as of February 29, 2000 (unless otherwise
indicated), the number of shares of the Company's common stock beneficially
owned by directors, the executive officers named in the Summary Compensation
Table and all directors and executive officers of the Company as a group, with
sole voting and investment power, unless otherwise indicated. No individual
director or executive officer beneficially owned more than one percent of the
outstanding common stock, and all directors and executive officers of the
Company as a group beneficially owned approximately 1.3% of the outstanding
common stock, as of February 29, 2000.
<TABLE>
<CAPTION>
Shares Held
and Nature of
Name of Beneficial Owner Position Beneficial Ownership
- ------------------------ -------- --------------------
<S> <C> <C>
Joseph F. Alibrandi............. Director 18,694(1)
Jack S. Blanton................. Director 40,564(1)
John J. Burns, Jr............... Director 24,857
George Deukmejian............... Director 20,698(1)
Robert D. Krebs................. Chairman and Chief
Executive Officer,
Director 3,122,822(5)(6)
Bill M. Lindig.................. Director 18,016(1)
Vilma S. Martinez............... Director 10,413(1)(4)
Roy S. Roberts.................. Director 18,875(1)
Marc J. Shapiro................. Director 19,783(1)
Arnold R. Weber................. Director 34,192(1)
Robert H. West.................. Director 17,353(1)
J. Steven Whisler............... Director 23,344(1)(3)
Edward E. Whitacre, Jr.......... Director 31,396(1)
Ronald B. Woodard............... Director 21,482(1)
Michael B. Yanney............... Director 69,509(1)
Matthew K. Rose................. President and Chief
Operating Officer 489,476(5)
Charles L. Schultz.............. Executive Vice President
and Chief Marketing
Officer 580,836(5)(7)
Jeffrey R. Moreland............. Senior Vice President-
Law and Chief of Staff 599,680(5)
Thomas N. Hund.................. Senior Vice President
and Chief Financial
Officer 401,894(5)(8)
Directors and Executive Officers
as a Group..................... 5,881,373(1)(5)
</TABLE>
- --------
(1) The amounts reported include restricted stock issued under the Non-Employee
Directors' Stock Plan as follows: 4,396 for each of Messrs. Alibrandi,
Burns, Deukmejian, Lindig, Roberts, Shapiro, Weber, West, Whisler,
Whitacre, Woodard, and Yanney; 3,556 for Mr. Blanton; 3,958 for
Ms. Martinez; and 60,266 for all directors as a group.
The amounts reported include shares which may be acquired within 60 days
upon the exercise of stock options under the Non-Employee Directors' Stock
Plan as follows: 12,000 for each of Messrs. Alibrandi, Burns, Deukmejian,
Roberts, Shapiro, West, Whisler, and Woodard; 30,000 for each of Messrs.
Blanton and Yanney; 9,000 for Mr. Lindig; 6,000 for Ms. Martinez; 24,000
for Mr. Weber; 21,000 for Mr. Whitacre; and 216,000 for all directors as a
group.
12
<PAGE>
Compensation Committee Report on
1999 Executive Compensation
The amounts reported include phantom stock units under the Deferred
Compensation Plan for Directors as of February 29, 2000 as follows: 621
for Mr. Blanton; 5,041 for Mr. Burns; 598 for Mr. Roberts; 2,328 for Mr.
Whisler; 4,699 for Mr. Woodard; 16,726 for Mr. Yanney; and 30,013 for all
directors as a group.
(2) Mr. Burns is President and Chief Executive Officer of Alleghany
Corporation, which beneficially owns 17,949,242 shares of the Company's
common stock.
(3) Includes 4,233 shares in which Mr. Whisler shares voting and investment
power as co-trustee and co-beneficiary of a family revocable trust.
(4) Includes 455 shares Ms. Martinez holds through a Retirement Savings Money
Purchase Pension Plan.
(5) The amounts reported include shares of restricted stock granted to
executive officers as follows: 174,021 for Mr. Krebs; 60,169 for Mr. Rose;
42,221 for Mr. Schultz; 59,546 for Mr. Moreland; 64,893 for Mr. Hund; and
475,011 for all executive officers as a group.
The amounts reported include shares which may be acquired within 60 days
upon the exercise of stock options as follows: 2,133,067 for Mr. Krebs
(including 609,000 held in a family partnership to which Mr. Krebs
disclaims beneficial ownership); 426,000 for Mr. Rose; 492,183 for Mr.
Schultz; 503,634 for Mr. Moreland; 235,482 for Mr. Hund; and 4,005,186 for
all executive officers as a group.
The amounts reported include share equivalents credited under the
Investment and Retirement Plan, a 401(k) plan, as of February 29, 2000, as
follows: 31,818 for Mr. Krebs; 1,296 for Mr. Rose; 10,406 for Mr. Schultz;
8,615 for Mr. Moreland; 5,644 for Mr. Hund; and 59,970 for all executive
officers as a group.
(6) Includes 28,917 shares held by a family partnership to which Mr. Krebs
disclaims beneficial ownership.
(7) Includes 75 shares and 141 shares held by immediate family members to
which Mr. Schultz disclaims beneficial ownership and 177 shares held in an
IRA account.
(8) Includes 720 shares held by an immediate family member.
COMPENSATION COMMITTEE REPORT ON 1999 EXECUTIVE COMPENSATION
Compensation Committee
The following report on 1999 executive compensation is presented by the
Compensation Committee of the Board (the "Committee") which has responsibility
for reviewing and making recommendations to the Board for executive
compensation. This includes establishing and reviewing executive base salaries,
administering the annual Incentive Compensation Plan as it relates to executive
officers, and administering equity-based compensation under the Burlington
Northern Santa Fe 1999 Stock Incentive Plan ("Stock Plan") and predecessor
plans. The Committee consists of independent, non-employee directors who have
no interlocking relationships with the Company.
BNSF Vision
The Company's vision is to realize its tremendous potential by providing
transportation services that consistently meet customers' expectations.
Benchmarks are identified against which the Company can measure its success in
meeting the needs of its primary constituencies--customers, shareholders,
employees and communities. The Company's executive compensation programs help
the Company realize its vision and support its business strategies.
Philosophies and Objectives
The Committee believes that compensation programs should reflect the
Company's compensation philosophy and support specific compensation objectives.
The Committee also believes that programs designed specifically for executives
should exemplify the Company's compensation philosophy and reflect executives'
roles as key decision-makers. The philosophical principles and specific
objectives are noted below.
13
<PAGE>
Compensation Committee Report on
1999 Executive Compensation
Philosophical Principles
. Compensation programs should encourage strong operating and financial
performance.
. Compensation programs should help create a shared sense of direction,
ownership and commitment.
. The Company should emphasize performance-based compensation ("pay at
risk") through both cash and equity-based incentives.
Specific Program Objectives
. The compensation programs should attract and retain key employees and
managers by providing competitive opportunities.
. The programs should focus employees on operating performance that will
maximize the value of the Company's rail operations.
. The programs should focus employees on the market performance of the
Company's stock by encouraging large equity holdings, thus enabling
employees to realize significant gains if the Company attains its
performance objectives.
. The programs should provide mechanisms to allow employees to exchange
cash compensation for stock-based awards.
Competitive Compensation Objectives
The Committee has established external competitive benchmarks for each
element of compensation which it believes fully support the principles outlined
above. The market for assessing compensation is defined as companies from
general industry with revenue comparable to the Company. The group of
comparators used for these analyses will be broader than that used for the peer
group index reflected in the Performance Graph following this report. The
Committee believes that the Company's most direct competitors for executive
talent are not limited to companies used as a peer group to compare shareholder
returns. Rather, the market reflects a broader group with which the Company
competes to attract and retain the most skilled and talented executives
available.
The Committee's marketplace compensation objectives are:
. Base salaries--To manage fixed compensation at a conservative level,
market rates for executives' base salary ranges will be set at
approximately the 25th percentile level.
. Annual Incentives--Opportunities under the Incentive Compensation Plan
("ICP") are intended to provide competitive total cash compensation (base
salary plus annual incentives) based on performance goal achievement. If
the Company attains its targeted performance goals (67% ICP achievement),
cash compensation levels will approximate the 50th percentile of the
Company's comparator group. If the Company attains superior performance
levels, cash compensation will exceed the 50th percentile of the
Company's comparator group.
. Long-Term Incentives--To place greater emphasis on pay that is tied to
the Company's stock performance over time, opportunities provided under
long-term incentive programs will be targeted at the 75th percentile of
total compensation in the comparator market.
. Employee and Executive Benefits--Benefit levels will reflect competitive
market levels (competitive market median).
Annual Cash Compensation
Base Salaries. The Company considers various factors in assigning executives
to specific salary ranges, including job content, level of responsibility and
accountability. On an annual basis, all employees' salaries, including those of
executives, are reviewed and adjusted to reflect individual performance and
position within their respective ranges.
14
<PAGE>
Compensation Committee Report on
1999 Executive Compensation
Incentive Compensation Plan. Executives are eligible for annual performance-
based awards under the Company's ICP as are all salaried employees. For 1999,
goals for all participants, including executives, were weighted 50% upon
achievement of targeted levels of operating income, 15% each upon achievement
of safety and on-time performance goals, and 20% on departmental goals which
focused on operating efficiency, business unit margins and contributions, and
equipment utilization. The incentive award for all employees, including all
executive officers, reflected payouts of 56.23%, 53.93% and 55.08% of the
individual's maximum ICP potential for the operations, marketing and staff
departments, respectively.
The actual incentives earned by Messrs. Rose, Schultz, Moreland, Hund and
Springer for achievement of Company goals were based on the Company's
performance as described under "CEO Compensation" in this report. For 2000, the
operating income weighting is increasing from 50% to 60%, the weightings for
safety and on-time performance remain at 15% each, and equipment utilization is
weighted at 10%. There are no departmental goals for 2000.
The level of award opportunity under the ICP varies by executive.
Opportunities generally are established to provide competitive (50th
percentile) cash compensation relative to the market for performance that meets
the Company's targets, and will exceed the 50th percentile of cash compensation
for superior Company performance.
Long-Term Incentives
To encourage ownership in the Company and to align employees' interests with
those of shareholders, the Company provides equity grants under the Stock Plan.
The Stock Plan supports the Company's compensation philosophy and objectives,
and encourages employee focus on the types and levels of performance that lead
to increased stock prices and overall returns to shareholders. The specific
programs used under the plan, including the Incentive Bonus Stock Program,
Stock Option Grants, the Salary Exchange Option Program, the Performance Share
Plan and the Senior Management Stock Deferral Plan, all enable and support
executive stock ownership.
Stock Ownership Goals. A commitment to significant stock ownership on the
part of the Company's management is an important element of the compensation
programs. The Committee has established stock ownership guidelines as follows.
<TABLE>
<CAPTION>
1999 Stock Ownership Goals
Executive Level (As a Multiple of Salary)
--------------- --------------------------
<S> <C>
Senior Vice Presidents............................... 4 x Base Salary
Vice Presidents...................................... 3 x Base Salary
Senior Managers in Salary Bands 34-36................ 1 to 3 x Base Salary
</TABLE>
Each executive and senior manager covered by the goals is required to retain
the net after-tax shares obtained through option exercises, or through vested
restricted stock, until he or she accumulates the required ownership levels.
The Committee monitors total share holdings on an annual basis. Ninety-two
percent of all executives and senior managers currently meet their respective
ownership goals.
Incentive Bonus Stock Program. To encourage individual stock ownership,
executives and senior managers are given the opportunity to exchange up to 100%
of their ICP cash awards for a grant of restricted stock. Participants electing
the exchange receive a restricted stock grant equal to 150% of the ICP award
foregone. Shares generally will vest three years after grant, but may vest in
two years upon attainment of certain pre-specified return on invested capital
performance goals.
15
<PAGE>
Compensation Committee Report on
1999 Executive Compensation
Stock Option Grants. Under the Stock Plan, the Company makes periodic grants
of stock options to all salaried employees. Stock options cannot be issued with
an exercise price below the market value of the Company common stock on the
date of grant, thus ensuring that recipients will realize benefit only when the
price of the Company's stock appreciates. Stock options for executives and
others may also include a reload feature that encourages executives to exercise
their options and helps them achieve their stock ownership goals. To reinforce
the Company's goal of linking a substantial portion of total compensation to
stock value, the grant sizes for all eligible employees are targeted to provide
long-term incentive opportunities at the 75th percentile of the market. Actual
stock option grants also reflect each recipient's individual performance and
salary band.
Salary Exchange Option Program. To reinforce the link between stock price
performance and executive compensation, executives and selected senior managers
have the opportunity to exchange up to 25% of their base salary each year for a
grant of non-qualified stock options with an exercise price equal to the fair
market value of the Company's common stock on the date of grant and with a term
of up to ten years from date of grant. Participants receive 450 non-qualified
stock options for each $1,000 of base salary exchanged and may elect salary
exchanges for up to three consecutive years at one time. The plan initially
allowed participants to revoke their election as to any future year prior to
the start of that year, and have the associated options canceled, but the plan
was amended in late 1999 to eliminate this feature on future elections.
Performance Share Plan. On January 18, 1996, the Company made a special,
one-time grant of performance-based restricted stock to executives and other
selected senior managers which at year-end 1999 was in the vesting measurement
period for the first one-third of the grant. The first one-third will vest when
the fair market value of the Company's stock maintains a value of $34.89 for 30
consecutive trading days before January 18, 2002. The second one-third will
vest when the fair market value of the stock maintains a value of $39.08 for 30
consecutive trading days between January 18, 2000 and January 18, 2002. The
final one-third will vest when the fair market value of the stock maintains a
value of $43.76 for 30 consecutive trading days between January 18, 2001, and
January 18, 2002. If the Company's stock price does not reach these performance
goals by January 18, 2002, the corresponding shares will not vest and will be
forfeited.
Senior Management Stock Deferral Plan. The Senior Management Stock Deferral
Plan provides management with retirement and tax planning flexibility. The plan
allows senior managers to defer unrealized gains from non-qualified stock
option exercises, or the value of restricted stock grants, such as grants from
the Incentive Bonus Stock Program (above). Stock options must be exercised
using previously acquired shares of the Company's common stock to take
advantage of this plan.
CEO Compensation
The factors upon which Mr. Krebs' 1999 compensation was based are the same
as described for all executive officers pursuant to the executive compensation
strategy described earlier in this report. Mr. Krebs is eligible to participate
in the same compensation plans available to other executive officers of the
Company. Mr. Krebs participates in the Company's programs that allow him to
receive restricted shares instead of cash for ICP awards and that allow him to
exchange a significant portion of his base salary for options. Mr. Krebs' 1999
stock ownership goal was seven times his base salary, and he exceeded this
goal.
The Committee assesses Mr. Krebs' base salary each year based on a review by
outside consultants of compensation levels for the Company relative to those of
corporations of comparable size, revenues and employee base. In accordance with
its established objectives, the Committee measures Mr. Krebs' base salary
against the 25th percentile for an organization of the Company's size, as
reflected in competitive studies.
16
<PAGE>
Compensation Committee Report on
1999 Executive Compensation
Mr. Krebs' base salary has remained at $725,000 since January 1, 1996. In
1999, Mr. Krebs' salary paid was $463,333, reflecting his previous election to
exchange salary for stock options under the Salary Exchange Option Program, and
deductions for substantially all of the annual costs of two life insurance
policies benefitting his children under the Company's Estate Enhancement
Program.
In January 1999, the Committee granted Mr. Krebs 450,000 non-qualified stock
options. The size of this grant was based on competitive data and was
reflective of Mr. Krebs' desire to receive options instead of an increase in
his base salary. Mr. Krebs also declined to receive a base salary increase for
2000.
Mr. Krebs' 1999 incentive opportunity under the ICP was weighted 50% upon
achievement of targeted growth in operating income, 15% each upon the
achievement of safety and on-time performance goals, and 20% upon departmental
goals which focused on operating efficiency, business unit margins and
contributions, and equipment utilization. The actual incentive earned by Mr.
Krebs was $634,522. Mr. Krebs exchanged virtually all his award for shares of
restricted stock under the Incentive Bonus Stock Program. The computation for
the percentage of goal achievement for Mr. Krebs and other executive officers,
which resulted in a 55.08% payout for Mr. Krebs and others in staff
departments, was exactly the same as the computation for other salaried
employees.
Actual awards for Mr. Krebs and others reflect operating income that was
46.50% of the goal. Awards also reflect the Company's performance relative to
aggressive safety goals; the Company did not attain its goals for reduction of
lost work time or personal injuries on the system (as measured by Federal
Railroad Administration standards). In addition, the awards reflect the fact
that the Company substantially met or exceeded goals for on-time performance.
Lastly, the awards reflect the fact that the Company partially met its
departmental goals, which focused on operating efficiency, business unit
margins and contributions, and equipment utilization.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the tax deductibility by
a company of compensation in excess of $1 million paid to any of its most
highly compensated executive officers. However, performance-based compensation
that has been approved by shareholders is excluded from the $1 million limit
if, among other requirements, the compensation is payable only upon attainment
of pre-established, objective performance goals and the board committee that
establishes such goals consists only of "outside directors" (as defined for
purposes of Section 162(m)). All members of the Committee qualify as "outside
directors."
The Committee has considered these requirements and the regulations. While
the tax impact of any compensation arrangement is one factor to be considered,
this impact is evaluated by the Committee in light of the Company's overall
compensation philosophy and objectives. The Company has established the Stock
Plan which permits the grant of stock awards that meet the requirements of
Section 162(m) of the Internal Revenue Code and, hence, will maximize the
Company's federal income tax deductions for compensation expense. However, the
Committee believes there are circumstances in which the Company's and
shareholders' interests may be best served by providing compensation that is
not fully deductible, and that its ability to exercise discretion outweighs the
advantages of qualifying compensation under Section 162(m).
Compensation Committee:
Michael B. Yanney, Chairman Bill M. Lindig
Joseph F. Alibrandi Roy S. Roberts
Jack S. Blanton Robert H. West
John J. Burns, Jr. Ronald B. Woodard
17
<PAGE>
Performance Graph
PERFORMANCE GRAPH
The following graph depicts a five year comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 Stock Index
("S&P 500"), and the Standard & Poor's Railroad Index ("S&P Rail"). The Company
is included within both the S&P 500 and S&P Rail indices. The graph assumes the
investment of $100 on December 31, 1994, in the common stock of the Company's
predecessor, Burlington Northern Inc., the S&P 500 and the S&P Rail, and the
reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
December 31 Company S&P 500 S&P Rail
----------- ------- ------- --------
<S> <C> <C> <C>
1994 $100 $100 $100
1995 $165 $137 $146
1996 $186 $169 $174
1997 $203 $225 $196
1998 $227 $289 $180
1999 $163 $350 $152
</TABLE>
18
<PAGE>
Executive Compensation
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation earned by our Chief
Executive Officer and each of the other four most highly compensated executive
officers in 1999, and one former executive officer who retired in 1999, for the
years indicated below.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
------------------ -----------------------
Securities
Underlying
Name and Principal Restricted Options All Other
Position Year Salary(1) Bonus(2) Stock(2)(3) (Shares)(4) Compensation(5)
------------------ ---- --------- -------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Krebs......... 1999 $463,333 $ 39,856 $891,998 573,414 $ 159,646
Chairman and 1998 $530,000 $ 35,961 $809,640 613,008 $ 97,533
Chief Executive Officer 1997 $530,000 $ 28,875 $655,491 440,250 $ 89,913
Matthew K. Rose......... 1999 $371,833 $145,807 $424,555 269,350 $ 31,074
President and 1998 $310,000 $124,579 $362,744 135,000 $ 28,955
Chief Operating Officer 1997 $262,917 $ 76,958 $212,188 108,300 $ 22,736
Charles L. Schultz...... 1999 $288,333 $305,772 $ 0 187,800 $ 23,115
Executive Vice
President and 1998 $271,000 $147,926 $174,342 103,950 $ 22,991
Chief Marketing Officer 1997 $236,667 $206,959 $ 0 97,689 $ 17,673
Jeffrey R. Moreland..... 1999 $231,708 $286,361 $ 0 111,450 $ 37,127
Senior Vice President-
Law and 1998 $245,000 $ 20,316 $365,758 114,819 $ 21,829
Chief of Staff 1997 $197,000 $ 13,171 $228,468 90,150 $ 14,481
Thomas N. Hund.......... 1999 $221,550 $ 0 $316,583 131,100 $ 8,489
Senior Vice President
and 1998 $180,000 $ 12,162 $227,668 55,200 $ 14,750
Chief Financial Officer 1997 $142,200 $ 8,399 $173,954 74,079 $ 10,650
Denis E. Springer....... 1999 $176,167 $323,154 $ 0 100,000 $1,934,970
Senior Vice President
and 1998 $338,000 $299,550 $ 0 121,950 $ 27,332
Chief Financial Officer
(retired) 1997 $321,000 $235,210 $ 0 127,674 $ 17,361
</TABLE>
- --------
(1) Salary has been reduced by the amounts foregone for participation in the
Salary Exchange Option Program by Messrs. Krebs, Rose, Schultz, Moreland,
Hund and Springer and for participation in the Company's Estate
Enhancement Program for Mr. Krebs in 1999, 1998 and 1997, and for Mr.
Moreland in 1999.
(2) The bonus awards for the individuals named above were paid pursuant to the
annual incentive compensation plan described in the Compensation Committee
Report on 1999 Executive Compensation in this proxy statement. Messrs.
Krebs, Rose and Hund elected to forego all or a portion of their annual
incentives pursuant to the Incentive Bonus Stock Program for restricted
stock in 1997, 1998 and 1999. Mr. Schultz made a similar election as to
1998, and Mr. Moreland made a similar election as to 1997 and 1998.
Dividends are paid to holders of restricted stock.
(3) Restricted stock and its corresponding market value owned by the
individuals named above, based upon a per share value of $24.25 as of
December 31, 1999, is as follows:
<TABLE>
<CAPTION>
Shares of
Named Executive Restricted Stock Market Value
--------------- ---------------- ------------
<S> <C> <C>
Robert D. Krebs................................ 165,191 $4,005,882
Matthew K. Rose................................ 43,624 $1,057,882
Charles L. Schultz............................. 42,221 $1,023,859
Jeffrey R. Moreland............................ 59,546 $1,443,991
Thomas N. Hund................................. 52,556 $1,274,483
Denis E. Springer.............................. 0 $ 0
</TABLE>
19
<PAGE>
Executive Compensation
(4) Amounts for 1998 and 1997 have been adjusted to reflect a three-for-one
stock split in 1998.
(5) For 1999, reflects matching contributions to the Burlington Northern Santa
Fe Investment and Retirement Plan and the Burlington Northern Santa Fe
Supplemental Investment and Retirement Plan. In addition, in connection
with their 1999 participation in the Company's Estate Enhancement Program,
$116,667 is reflected for Mr. Krebs and $16,292 is reflected for Mr.
Moreland and, in connection with his retirement in 1999, a severance
payment of $1,913,400 is reflected for Mr. Springer.
Stock Option Grants in 1999
The following table provides information as to the individuals named in the
Summary Compensation Table and grants of options during 1999. All initial
option grants to these individuals have a reload feature under which optionees
using outstanding shares to pay the exercise price receive an option for the
number of shares so used with an exercise price equal to the fair market value
on the date of exercise and expiring on the same date as the initial option. No
more than two reload grants may be made in connection with any initial grant
and the reload feature is not available with respect to any grant of options
pursuant to a reload.
<TABLE>
<CAPTION>
Number of
Securities % of Total Individual Grants Potential
Underlying Options ---------------------- Realizable Value
Options Granted to Exercise or at Assumed
Granted Employees in Base Price Expiration Black-Scholes
Name (Shares) Fiscal Year ($/Share) Date Calculation(7)
---- ---------- ------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Robert D. Krebs(1)...... 81,450 0.83% $33.55 01/01/2009 $ 700,470
450,000 4.59% $32.84 01/20/2009 $3,780,000
8,622 0.09% $34.78 03/28/2005 $ 77,253
24,768 0.25% $33.68 03/28/2005 $ 214,243
Matthew K. Rose(2)...... 19,350 0.20% $33.55 01/01/2009 $ 166,410
150,000 1.53% $32.84 01/20/2009 $1,260,000
100,000 1.02% $34.59 05/21/2009 $ 890,000
Charles L. Schultz(3)... 37,800 0.39% $33.55 01/01/2009 $ 325,080
75,000 0.77% $32.84 01/20/2009 $ 630,000
75,000 0.77% $34.59 05/21/2009 $ 667,500
Jeffrey R. Moreland(4).. 36,450 0.37% $33.55 01/01/2009 $ 313,470
75,000 0.77% $32.84 01/20/2009 $ 630,000
Thomas N. Hund(5)....... 26,100 0.27% $33.55 01/01/2009 $ 224,460
30,000 0.31% $32.84 01/20/2009 $ 252,000
75,000 0.77% $34.59 05/21/2009 $ 667,500
Denis E. Springer(6).... 100,000 1.02% $32.84 02/28/2001 $ 840,000
</TABLE>
- --------
(1) The option grant of 81,450 shares, exercisable beginning January 1, 2002,
was granted on January 1, 1999, with a reload option in exchange for
$181,000 of his 2001 base salary. The option grant of 450,000 shares, with
a reload option, was granted on January 20, 1999, and includes
consideration of Mr. Krebs' desire to decline a 1999 salary increase. This
option grant became exercisable on January 20, 2000. The option grant of
8,622 shares was granted on February 4, 1999, as a reload grant in
connection with his use of shares to exercise vested stock options and
became exercisable on August 4, 1999. The option grant of 24,768 shares
was granted on April 27, 1999, as a reload grant in connection with his
use of shares to exercise vested stock options and became exercisable on
October 27, 1999.
(2) The option grant of 19,350 shares, exercisable beginning January 1, 2001
and January 1, 2002, respectively, was granted on January 1, 1999, with a
reload option in exchange for $5,000 of his 2000
20
<PAGE>
Executive Compensation
base salary and $38,000 of his 2001 base salary. The option grant of 150,000
shares was granted on January 20, 1999, with a reload option, and became
exercisable on January 20, 2000. The option grant of 100,000 shares was
granted on May 21, 1999, with a reload option, and becomes exercisable in
one-third increments beginning May 21, 2000.
(3) The option grant of 37,800 shares, exercisable beginning January 1, 2002,
was granted on January 1, 1999, with a reload option in exchange for
$84,000 of his 2001 base salary. The option grant of 75,000 shares was
granted on January 20, 1999, with a reload option, and became exercisable
on January 20, 2000. The option grant of 75,000 shares was granted on May
21, 1999, with a reload option, and becomes exercisable in one-third
increments beginning May 21, 2000.
(4) The option grant of 36,450 shares, exercisable beginning January 1, 2002,
was granted on January 1, 1999, with a reload option in exchange for
$81,000 of his 2001 base salary. The option grant of 75,000 shares was
granted on January 20, 1999, with a reload option, and became exercisable
on January 20, 2000.
(5) The option grant of 26,100 shares, exercisable beginning January 1, 2002,
was granted on January 1, 1999, with a reload option in exchange for
$58,000 of his 2001 base salary. The option grant of 30,000 shares was
granted on January 20, 1999, with a reload option, and became exercisable
on January 20, 2000. The option grant of 75,000 shares was granted on May
21, 1999, with a reload option, and becomes exercisable in one-third
increments beginning May 21, 2000.
(6) The option grant of 100,000 shares, exercisable beginning January 20,
2000, was granted on January 20, 1999, with a reload option.
(7) The estimated present value at grant date reflected in the table has been
calculated using the Black-Scholes option pricing model based on the
following assumptions:
Exercise price: Equal to the fair market value of the underlying stock on
the date of grant
Interest rate: Equal to interest rate on a U.S. Treasury security on
December 31, 1999, with a maturity date corresponding to
the option term
Volatility rate: 30%
Dividend rate: $0.48 annual dividend per share
The approach used in developing the assumptions upon which the Black-
Scholes variation was based is consistent with the requirements of
Statement of Financial Accounting Standard No. 123, "Accounting for Stock
Based Compensation." The ultimate value of these options will depend on the
future market price of the Company's stock. The Black-Scholes model is only
one method of valuing options, and the actual value of the options may be
significantly different. The actual value of an option to an executive, if
any, will depend on the excess of the stock price over the exercise price
on the date the option is exercised.
21
<PAGE>
Executive Compensation
Aggregated 1999 Stock Option Exercises and Year-End Option Values
The following table provides information as to the individuals named in the
Summary Compensation Table concerning their exercise of stock options during
1999 and unexercised stock options held as of the end of 1999. No executives
held Stock Appreciation Rights ("SARs") in 1999 and BNSF has no plans to award
SARs in the future.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-The-Money Options/SARs
Shares Aggregate Year End (Shares) at Year End(1)(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Krebs(3)...... 194,642 $4,329,495 1,576,243 777,150 $1,295,510 $ 0
Matthew K. Rose(3)...... 15,000 $ 177,870 253,950 291,400 $ 0 $ 0
Charles L. Schultz(3)... 45,210 $1,468,873 385,683 255,750 $2,228,634 $ 0
Jeffrey R. Moreland(3).. 6,891 $ 43,406 393,984 181,200 $2,243,387 $ 0
Thomas N. Hund(3)....... 0 $ 0 103,500 258,282 $ 76,957 $114,496
Denis E. Springer....... 118,946 $3,239,747 377,238 0 $ 507,622 $ 0
</TABLE>
- --------
(1) Dollar values are calculated by determining the difference between the
fair market value of the securities underlying options and the exercise
price of options at exercise or at year-end, as applicable.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise or base price of the option.
(3) Messrs. Krebs, Rose, Schultz, Moreland and Hund revoked their elections
under the Salary Exchange Option Program referred to under the prior table
and forfeited the associated options, and Messrs. Krebs, Schultz, Moreland
and Hund also revoked prior elections with respect to salary for 2000 of
$181,000, $81,000, $78,000 and $56,000 and forfeited associated options to
purchase 81,450, 36,450, 35,100 and 25,200 shares with an exercise price of
$30.97 per share.
Pension Plans
The following tables show the estimated pension benefits payable to a
covered participant at normal retirement age (age 65) under the Burlington
Northern Santa Fe Retirement Plan ("Retirement Plan"), as well as under the
non-qualified supplemental pension plan that provides benefits that would
otherwise be denied participants by reason of certain Internal Revenue Code
limitations on qualified plan benefits.
A participant's average yearly compensation for purposes of the Retirement
Plan is based upon his or her average base salary and cash bonus earned for the
60 consecutive months during the last 120 months of service for which such
average is the highest or, in the case of a participant who has been employed
for less than five years, the period of his or her employment with the Company
and its subsidiaries. For purposes of the Retirement Plan, covered compensation
for 1999 for the individuals named in the Summary Compensation Table who are
currently serving was:
<TABLE>
<CAPTION>
Estimated
1999 Covered Years of
Executive Officer Compensation Service
- ----------------- ------------ ---------
<S> <C> <C>
Robert D. Krebs.......................................... $1,242,855 34
Matthew K. Rose.......................................... $ 849,677 7
Jeffrey R. Moreland...................................... $ 595,595 22
Charles L. Schultz....................................... $ 664,105 30
Thomas N. Hund........................................... $ 479,606 17
</TABLE>
Mr. Springer retired during 1999 with 18 years of credited service.
22
<PAGE>
Executive Compensation
Pursuant to the Retirement Plan, Messrs. Krebs, Moreland, Schultz and
Springer are grandfathered under the Santa Fe Pacific Retirement Plan benefit
formula that was in place prior to adoption of the Retirement Plan. Annual
benefits payable under the SFP benefit formula are not subject to any reduction
for Railroad Retirement, Social Security, or other offsets. The estimated
annual benefits are computed in the form of a single life annuity and are based
on average earnings and years of service at retirement as follows:
Prior SFP Retirement Plan Formula
<TABLE>
<CAPTION>
Average Years of Service
Annual ----------------------------------------------------------------
Compensation 10 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 58,593 $ 87,889 $117,186 $146,482 $175,778 $205,075 $ 234,371
$ 500,000 $ 74,593 $111,889 $149,186 $186,482 $223,778 $261,075 $ 298,371
$ 600,000 $ 90,593 $135,889 $181,186 $226,482 $271,778 $317,075 $ 362,371
$ 800,000 $122,593 $183,889 $245,186 $306,482 $367,778 $429,075 $ 490,371
$1,200,000 $186,593 $279,889 $373,186 $466,482 $559,778 $653,075 $ 746,371
$1,600,000 $250,593 $375,889 $501,186 $626,482 $751,778 $877,075 $1,002,371
</TABLE>
Mr. Rose and Mr. Hund are covered under the current Retirement Plan formula.
Annual benefit levels under the BNSF Retirement Plan are not subject to any
reduction for Social Security, Railroad Retirement, or other offsets. The
estimated annual benefits are computed in the form of a single life annuity and
are based on average earnings and years of service at retirement as follows:
BNSF Retirement Plan Formula
<TABLE>
<CAPTION>
Average Years of Service
Annual --------------------------------------------------------------
Compensation 10 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 51,412 $ 77,119 $102,825 $128,531 $154,237 $179,943 $205,650
$ 500,000 $ 65,412 $ 98,119 $130,825 $163,531 $196,237 $228,943 $261,650
$ 600,000 $ 79,412 $119,119 $158,825 $198,531 $238,237 $277,943 $317,650
$ 800,000 $107,412 $161,119 $214,825 $268,531 $322,237 $375,943 $429,650
$1,200,000 $163,412 $245,119 $326,825 $408,531 $490,237 $571,943 $653,650
$1,600,000 $219,412 $329,119 $438,825 $548,531 $658,237 $767,943 $877,650
</TABLE>
Employment Contracts and Change in Control Arrangements
Current executive severance agreements
In January 1997, the Board of Directors adopted new change in control
arrangements to replace existing BNI and SFP severance agreements. Shareholder
approval of the Amended and Restated Combination Agreement dated as of December
18, 1999 among the Company, Canadian National Railway Company, North American
Railways, Inc., and Western Merger Sub, Inc. will constitute a change in
control under Burlington Northern Santa Fe's severance agreements, including
those with Messrs. Schultz, Moreland and Hund and two other executive officers.
As a result, the minimum term of the severance agreements will be extended to
one year after the combination is completed. In addition, upon a qualifying
termination of employment coincident with or following a change in control, an
officer with a severance agreement would receive benefits equal to three times
(one time for certain officers) base salary and target bonus plus a tax make-
whole payment (limited to the extent that its value, when aggregated with other
benefits or payments would result in an excise tax under Section 4999 of the
U.S. Internal Revenue Code), life, disability and health benefits for a period
of up to thirty-six months, vesting of all time-based restricted stock (but not
performance-based restricted stock), vesting of stock options (see "Stock
options and restricted stock awards" below),
23
<PAGE>
Shareholder Proposal
outplacement and legal fees and expenses relating to claims under the severance
agreement. Benefits under the severance agreements are limited if the total
benefits provided would result in an excise tax under Section 4999 of the U.S.
Internal Revenue Code (relating to golden parachute payments) except where the
total of the benefits exceeds 120% of three times the "base amount" (as defined
in Section 280G of the U.S. Internal Revenue Code), in which case the benefits
will be paid in full with all accompanying excise taxes due. If payments under
the individual severance agreements are triggered following a change in
control, the estimated amounts (excluding any value of the stock options and
restricted stock awards described below), based on current compensation levels,
payable to four of Burlington Northern Santa Fe's five most highly compensated
executive officers under their respective agreements would be as follows:
Charles L. Schultz, $3,793,546, Jeffrey R. Moreland, $3,307,397, and Thomas N.
Hund, $3,500,105, and to two other executive officers, $2,858,015 and
$1,626,554, respectively. Mr. Krebs also has a BNSF severance agreement, but
his agreement provides only for vesting of all time-based restricted stock but
not performance-based restricted stock, vesting of stock options, and payment
of any remaining obligations under the Burlington Northern Santa Fe estate
enhancement program (relating to life insurance). The estimated amount
(excluding any value of the stock options and restricted stock awards described
below) payable to Mr. Krebs upon a change in control and a qualifying
termination of employment would be $108,333.
Prior executive severance agreements
Certain officers, including Matthew K. Rose, retain benefits under a prior
executive severance agreement with BNI. These agreements provide benefits
similar to those provided under the agreements discussed above except that the
bonus would be paid at maximum level, certain additional pension benefits are
provided, and a tax make-whole payment is not provided. If payment is made to
Matthew K. Rose, as a result of shareholder approval of the combination and a
qualifying termination of employment under the terms of his individual
executive severance agreement, the estimated amount (excluding any value of the
stock options and restricted stock awards described below) based upon his
current compensation level would be $4,656,598.
Stock options and restricted stock awards
Under Burlington Northern Santa Fe's current and prior executive severance
agreements, consummation of the combination will accelerate, irrespective of
termination of employment, the vesting of, or lapse of restrictions and
restricted periods applicable to, specific grants of stock options outstanding
and restricted stock awards (other than performance-based awards and some
retention awards), to the extent not previously vested. Consummation of the
combination will also accelerate the vesting of or lapse of restrictions and
restricted periods applicable to specific grants of stock options or restricted
stock (other than performance-based awards and some retention awards) under
Burlington Northern Santa Fe's employee retention program.
If the combination were completed as of July 1, 2001, the number of
outstanding stock options and shares of restricted stock for which acceleration
would occur for the executive officers of Burlington Northern Santa Fe would be
as follows: (1) for stock options, Mr. Krebs, 33,000 shares; Mr. Rose, 33,334
shares; Mr. Schultz, 25,000 shares; Mr. Moreland, zero shares; and Mr. Hund,
25,000 shares and two other executive officers, 16,667 shares and zero shares,
respectively; and (2) for restricted stock, Mr. Krebs, 58,401 shares; Mr. Rose,
27,136 shares; Mr. Schultz, 5,090 shares; Mr. Moreland, 10,679 shares; and Mr.
Hund, 24,984 shares and two other executive officers, 12,000 shares and 7,856
shares, respectively. The number of outstanding stock options and shares of
restricted stock for which acceleration would occur may be higher for each of
Burlington Northern Santa Fe's five most highly compensated executive officers
in the event shareholder approval is received and a qualifying termination of
employment occurs prior to completion of the combination.
The Burlington Northern and Santa Fe Railway Company Severance Plan covers
all full-time salaried employees, including BNSF executive officers, who are
terminated other than for cause as defined in the
24
<PAGE>
Other Business
Severance Plan. A participant will generally be entitled to an amount up to two
years' pay based upon a participant's age, length of service and current
salary. Benefits under the Severance Plan will not be paid if a participant
receives payments under individual severance agreements. BNSF executives who
have individual severance agreements may elect to receive benefits under the
Severance Plan instead of the severance payments provided by their individual
severance agreements, but executive officers other than Mr. Krebs would receive
benefits under their individual agreements in excess of those provided by the
Severance Plan. Because Mr. Krebs' individual severance agreement pertains only
to stock awards and payment for life insurance premiums, his primary source of
severance payments would be the Severance Plan. Assuming a covered termination
occurred by December 31, 2001, Mr. Krebs would be entitled to a cash payment of
approximately $1,450,000 non-cash benefits with a value of approximately
$24,000 based on current compensation levels.
Trust Agreements
The Company maintains trust agreements to permit funds to be set aside with
respect to the Company's obligation to the individuals named in the Summary
Compensation Table and the directors under deferred compensation programs and
agreements, retirement commitments and supplemental retirement plans. To the
extent the plans are currently funded, the trusts provide for permanent funding
of benefits under the supplemental retirement plans and the Directors'
Retirement Plan on a present value basis. The trust agreements further provide
for a split-dollar life insurance plan ("Split-dollar Plan") for certain key
employees, including Mr. Krebs. The Split-dollar Plan provides for the purchase
of life insurance policies covering key employees, and for the payment to each
covered employee's beneficiary of a portion of the death benefit payable under
such employee's life insurance policy, with the remaining value in each policy
to be used to fund the other obligations of the trust. The trust retains all
rights to any cash values of the policies and the executive officers pay the
cost of term coverage.
In the event of a "change in control" of the Company, the trust agreements
provide for the payment of amounts that may become due, subject only to the
claims of general creditors of the Company in the event that it became bankrupt
or insolvent. Any of the following events are considered a "change in control":
. any person becomes the beneficial owner of securities representing 25% or
more of the voting power of the Company's outstanding securities;
. during any period of two consecutive years, individuals who at the
beginning of the period constitute the Board of Directors for the Company
cease to constitute at least a majority of the Board;
. the Company's shareholders approve a merger or consolidation of the
Company with another company; or
. the Company's shareholders approve a plan of complete liquidation or an
agreement for the sale or disposition by the Company of all or
substantially all of its assets.
SHAREHOLDER PROPOSAL
One owner of 123 shares of the Company's common stock has given notice that
he intends to introduce the following proposal and has furnished the following
statement in support of the proposal. The Company will provide the proponent's
name and address to shareholders promptly upon receiving an oral or written
request.
Resolved: That shareholders urge that the board of directors will solicit
shareholder approval for any "shareholder rights" plan that might be
adopted, and that if this approval is not granted in the form of a majority
of shares voted, than (sic) any rights plan be redeemed.
25
<PAGE>
Other Business
Supporting Statement
Shareholder rights plans, sometimes called "poison pills," may be adopted
by boards at any time. Our company might redeem a pill, adopt another, and
redeem that one, three separate moves, between the time this resolution is
filed in the fall of 1999, and the time of the 2000 annual meeting in the
spring. Yet I believe shareholders frequently oppose pills when they are
asked in a vote. This resolution merely urges the board to secure
shareholder approval if and when a pill is put in place by the board. The
case of Fleming Companies, Inc. and its unpopular pill should serve as a
cautionary tale to any board that believes its will subplants (sic)
shareholder interest.
Broadly, the poison pill has come to signify management insulation. By
adopting a policy that any shareholder rights plan would be ratified by a
shareholder vote, our board could demonstrate a commitment to insure the
greatest management care for shareholders.
Your directors recommend a vote AGAINST this proposal.
We adopted a shareholder rights plan to comply with our agreement to combine
with Canadian National Railway Company and to preserve our ability to
successfully complete this combination. Canadian law generally prohibits any
person from owning more than 15% of the voting rights in Canadian National. To
prevent a situation in which this legal requirement could not be complied with
at the closing of the transaction, we were required by the combination
agreement to adopt the rights plan, which will deter any person from obtaining
ownership of 15% or more of our common stock. To require the Board to obtain
shareholder approval in order to maintain the rights plan would defeat these
objectives and expose us to contractual liability.
On December 20, 1999, we announced our agreement to combine with Canadian
National to form the largest North American railway system. We believe that the
combination would enable us to achieve significant improvements in the services
we are able to offer and will benefit our customers, our stockholders, our
employees and the communities that we serve.
We believe that the combination is important to the future of our company,
and it will be submitted to our shareholders at the appropriate time. In the
meantime, however, it is important that the Board have the ability to maintain
this important step in order to avoid potential liability for breach of the
combination agreement and to preserve this opportunity for our shareholders.
For these reasons, we believe that adoption of the proposal would not be in
the best interest of our shareholders.
We recommend that the shareholders vote AGAINST this proposal.
OTHER BUSINESS
If any matters other than those set forth above are properly brought before
the meeting or any adjourned meeting, including any shareholder proposals
omitted from the proxy materials pursuant to Securities and Exchange Commission
rules, the persons acting under the proxy will vote the proxies given in
accordance with their best judgment.
26
<PAGE>
Other Business
One individual, two corporations he established, five of his family members
and their associates have indicated to the Company pursuant to the advance
notice of shareholder business provision of our By-laws that they intend to
present proposals at the annual meeting. These proposals, if made at the
meeting, would recommend:
. Shortening the advance notice required to be given for stockholder
proposals and nominations; that interested stockholders be invited to
attend and give their opinions at Board meetings; that a committee be
appointed to make corporate governance more "open" and include employees
and former employees in decisions affecting railroad safety; that the
Company terminate officers who have "inappropriately disciplined"
employees "for attempting to work in a safe manner and consistent with
railroad operating or safety rules."
. That the Board retain tenured faculty members as consultants to review
all shareholder proposals, ideas or concerns.
. The adoption of a new by-law creating a shareholder representatives
committee to review the management of the business and affairs of the
Company and advise the Board of the views of shareholders.
. That the Board develop a railroad crossing policy plan for the Company to
work with National League of Cities and Communities to increase safety at
grade crossings.
. That the Board direct the Company's managers to cancel the "Availability
Policy" and the "Attendance Watch Policy" and prohibit the unilateral
imposition of employment policies on scheduled employees as well as
related recommendations.
. That the Board cease efforts to construct a refueling station in Idaho,
disclose site locations and costs where it is required to remediate
former activities, and develop controls to avoid environmental risks.
. That the Board develop a plan that ties dividends to performance
benchmarks similar to the way executive compensation is determined, and
develop an executive bonus plan that ties executive bonuses to increases
in dividends.
. That the Board develop a personnel policy plan to encourage application
for employment at the Company of persons of diverse racial, ethnic and
gender backgrounds, nominate and encourage the election of directors of
diverse racial, ethnic and gender backgrounds, as well as related
recommendations concerning the use of racially derogatory terms and
promotion policies.
We believe that these issues are currently being addressed by the Company
and that they would require a duplication of effort or an inefficient use of
resources. All of these proposals, except the first one, were submitted for
inclusion in our annual meeting proxy materials but were omitted pursuant to
the rules of the Securities and Exchange Commission. If these proposals are
properly presented and are in order at the annual meeting, the persons acting
under the proxy intend to vote against them. The Company also has received
notices from a corporation the individual established and members of the
individual's family that at the meeting they intend to nominate him, two
current employees of a Company subsidiary, and the husband of a former
employee, for election as directors of the Company. The Board knows of no other
business that may come before the meeting.
By order of the Board of Directors.
MARSHA K. MORGAN
Vice President--Investor Relations
and
Corporate Secretary
27
<PAGE>
[BNSF LOGO]
<PAGE>
[X] Please mark your
votes as in this
example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR LISTED BELOW, AND AGAINST THE SHAREHOLDER PROPOSAL CONCERNING A
SHAREHOLDER RIGHTS PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW, AND
AGAINST THE SHAREHOLDER PROPOSAL CONCERNING SHAREHOLDER RIGHTS PLANS.
FOR WITHHELD
1. Election of Directors [ ] [ ] If marked, vote is withheld for all
nominees listed.
NOMINEES FOR DIRECTOR:
J.F. Alibrandi, J.J. Burns, Jr.,
G. Deukmejian, R.D. Krebs,
B.M. Lindig, V.S. Martinez,
R.S. Roberts, M.J. Shapiro,
A.R. Weber, R.H. West, J.S. Whisler,
E.E. Whitacre, Jr., R.B. Woodard,
M.B. Yanney.
For, except vote withheld from the following nominee(s):
- -----------------------------------------------
Shareholder Proposal concerning FOR AGAINST ABSTAIN
shareholder rights plans. [ ] [ ] [ ]
I plan to attend the Annual Meeting of
Stockholders [ ]
- ------------------------------------------------
In their discretion, the proxies are authorized to vote upon such
other business as is properly brought before the meeting.
Please sign EXACTLY as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such. This proxy votes all shares held in all
capacities.
----------------------------------------------------------
----------------------------------------------------------
SIGNATURE (S) DATE
- --------------------------------------------------------------------------------
[] FOLD AND DETACH PROXY CARD HERE AND RETURN IN ENCLOSED POSTAGE-PAID ENVELOPE;
RETAIN ADMISSION CARD []
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person. To make sure your shares are
represented, we urge you to complete and mail the proxy card above.
-----------------------------------------------------------
IF YOU PLAN ON ATTENDING THE 2000 ANNUAL MEETING,
PLEASE MARK THE BOX ON THE PROXY CARD ABOVE, AND BRING
THIS TICKET WITH YOU FOR ADMITTANCE AT THE ANNUAL
MEETING.
-----------------------------------------------------------
- --------------------------------------------------------------------------------
ADMISSION CARD
Burlington Northern Santa Fe Corporation
Annual Meeting of Shareholders
April 19, 2000, 2:00 P.M.
Fort Worth Club
306 West 7th Street
Fort Worth, Texas
<PAGE>
BURLINGTON NORTHERN SANTA FE CORPORATION
2650 LOU MENK DRIVE, SECOND FLOOR
FORT WORTH, TEXAS 76131-2830
This Proxy is solicited on behalf of the Board of Directors. The
undersigned, revoking any proxy previously given, hereby appoints Jeffrey
R. Moreland and Marsha K. Morgan, and each of them, proxy for the
P undersigned, with power of substitution, to vote as specified herein, all
R Common Stock held by the undersigned, with the same force and effect as the
O undersigned would be entitled to vote if personally present, at the annual
X meeting of shareholders of the Company to be held at the Fort Worth Club,
Y 306 West 7th Street, Fort Worth, Texas, Wednesday, April 19, 2000, at 2:00
P.M. and at any adjournment or postponement thereof. In their discretion,
the proxies are authorized to vote upon such other business as is properly
brought before the meeting.
You are encouraged to specify your choices by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors recommendation; however, the proxies
appointed above cannot vote your shares unless you sign and return this
card.
If you are a participant in any of the following employee benefit plans
of the Company, this card also constitutes voting instructions for any
shares held for the stockholder in the Burlington Northern Santa Fe
Investment and Retirement Plan, Burlington Northern 401(k) Plan for TCU
Employees, and Burlington Northern Santa Fe Non-Salaried Employees 401(k)
Retirement Plan. If you are a participant in any of these plans, your
shares will be voted in accordance with the terms of such plan.
IMPORTANT--PLEASE SIGN AND DATE ON REVERSE SIDE
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
[] Fold and Detach proxy card Here AND RETURN IN ENCLOSED POSTAGE-PAID ENVELOPE
[]
BURLINGTON NORTHERN SANTA FE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 19, 2000, 2:00 P.M.
FORT WORTH CLUB
306 WEST 7TH STREET
FORT WORTH, TEXAS
It is important that your shares are represented at the meeting, whether or not
you attend the meeting in person. To make sure your shares are represented, we
urge you to complete and mail the proxy card above in the enclosed postage-paid
envelope.
- --------------------------------------------------------------------------------
