-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T796zSsA8vUHLgI35UC3Am/ZwsUtlHFW161cTlj6rI+vNFIbvmmVle0DlntcLk7O JHOjJ5i6QXBYm6Z443Jhyg== 0000950131-98-002263.txt : 19980401 0000950131-98-002263.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950131-98-002263 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: CSX SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON NORTHERN SANTA FE CORP CENTRAL INDEX KEY: 0000934612 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 411804964 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11535 FILM NUMBER: 98583409 BUSINESS ADDRESS: STREET 1: 2650 LOU MENK DR STREET 2: 777 MAIN ST CITY: FT WORTH STATE: TX ZIP: 76131 BUSINESS PHONE: 8173332000 MAIL ADDRESS: STREET 1: 3800 CONTINENTAL PLAZA STREET 2: 777 MAIN STREET CITY: FORT WORTH STATE: TX ZIP: 76102-5384 FORMER COMPANY: FORMER CONFORMED NAME: BURLINGTON NORTHERN SANTE FE CORP DATE OF NAME CHANGE: 19950913 FORMER COMPANY: FORMER CONFORMED NAME: BNSF CORP DATE OF NAME CHANGE: 19941223 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER: 1-11535 ---------------- BURLINGTON NORTHERN SANTA FE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 41-1804964 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 2650 LOU MENK DRIVE SECOND FLOOR FORT WORTH, TEXAS 76131-2830 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) 817/333-2000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, $0.01 par value New York Stock Exchange Chicago Stock Exchange Pacific Exchange
---------------- Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $15.5 billion on February 28, 1998. For purposes of this calculation only, the registrant has excluded stock beneficially owned by directors and officers. By doing so, the registrant does not admit that such persons are affiliates within the meaning of Rule 405 under the Securities Act of 1933 or for any other purpose. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 156,807,093 shares outstanding as of February 28, 1998. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the documents from which parts thereof have been incorporated by reference and the part of the Form 10-K into which such information is incorporated: Annual Report to Shareholders for the fiscal year ended December 31, 1997..................................... PARTS I, II, AND IV Proxy Statement dated March 9, 1998.................... PART III
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PAGE ---- PART I Items 1 and 2. Business and Properties.................................... 1 Item 3. Legal Proceedings................................................. 10 Item 4. Submission of Matters to a Vote of Security Holders............... 15 EXECUTIVE OFFICERS OF THE REGISTRANT...................................... 15 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................................................. 16 Item 6. Selected Financial Data........................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 16 Item 8. Financial Statements and Supplementary Data....................... 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................... 18 PART III Item 10. Directors and Executive Officers of the Registrant............... 18 Item 11. Executive Compensation........................................... 19 Item 12. Security Ownership of Certain Beneficial Owners and Management... 19 Item 13. Certain Relationships and Related Transactions................... 19 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 19 SIGNATURES................................................................ S-1 REPORTS OF INDEPENDENT ACCOUNTANTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULE................................................................. F-1 EXHIBITS.................................................................. E-1
i PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES Burlington Northern Santa Fe Corporation ("BNSF") was incorporated in the State of Delaware on December 16, 1994. On September 22, 1995, the stockholders of Burlington Northern Inc. ("BNI") and Santa Fe Pacific Corporation ("SFP") became the stockholders of BNSF pursuant to a business combination of the two companies. In order to effect the combination, BNSF was formed to act as the parent holding company of BNI and SFP. On October 13, 1994, BNI, Burlington Northern Railroad Company ("BNRR"), SFP, and The Atchison, Topeka and Santa Fe Railway Company ("ATSF") filed a railroad merger and control application with the Interstate Commerce Commission ("ICC"). On August 23, 1995, the ICC issued its written decision approving and authorizing BNI's acquisition of control of SFP and the business combination by which BNI and SFP became subsidiaries of BNSF, the resulting common control of BNRR and ATSF by BNSF, the consolidation of BNRR and ATSF by BNSF, the consolidation of BNRR and ATSF operations, and the merger of BNRR and ATSF. Pursuant to the ICC's permissive authority, the business combination was effected on September 22, 1995. On December 30, 1996, BNI merged with and into SFP. On December 31, 1996, ATSF merged with and into BNRR, and BNRR changed its name to The Burlington Northern and Santa Fe Railway Company ("BNSF Railway"). On January 2, 1998, SFP merged with and into BNSF Railway. Through March 6, 1998, BNSF also had an equity interest in Santa Fe Pacific Pipeline Partners, L.P. and its operating subsidiary, which operated a 3,300- mile refined petroleum products pipeline system in six western and southwestern states, substantially all of which interest has now been sold. See "PIPELINE INVESTMENT." Through its subsidiaries, BNSF is engaged primarily in the rail transportation business. At December 31, 1997, BNSF and its subsidiaries had approximately 44,500 employees. RAIL The rail operations of BNSF Railway, BNSF's principal operating subsidiary, comprise one of the largest railroad systems in the United States. BNSF Railway's business and operations are described below. TRACK CONFIGURATION BNSF Railway operates over a railroad system consisting of, at December 31, 1997, approximately 34,000 route miles of track (excluding, among other things, second main track), approximately 25,400 miles of which are owned route miles, including easements, through 28 states and two Canadian provinces. Approximately 7,800 route miles of BNSF Railway's system consist of trackage rights which permit BNSF Railway to operate its trains with its crews over another railroad's tracks. As of December 31, 1997, the total BNSF Railway system--including first, second, third and fourth main tracks, yard tracks, and sidings--consisted of approximately 51,000 operated miles of track, all of which were owned by or held under easement by BNSF Railway except for approximately 8,600 miles operated under trackage rights agreements with other parties. At December 31, 1997, approximately 28,000 miles of BNSF Railway's track consisted of 112- pound per yard or heavier rail, including approximately 18,700 track miles of 131-pound per yard or heavier rail. 1 EQUIPMENT CONFIGURATION BNSF Railway owned or had under non-cancelable leases exceeding one year the following units of railroad rolling stock (1995 represents pro forma BNSF Railway):
AT DECEMBER 31, -------------------- 1997 1996 1995 ------ ------ ------ Diesel Locomotives................................... 4,697 4,434 4,277 ====== ====== ====== Freight Cars: Box--general purpose............................... 1,042 1,082 1,204 Box--specially equipped............................ 10,533 10,719 10,985 Open Hopper........................................ 10,617 10,430 10,497 Covered Hopper..................................... 43,145 44,112 44,840 Gondola............................................ 11,845 11,714 11,467 Refrigerator....................................... 6,606 6,817 7,216 Autorack........................................... 3,588 3,597 3,600 Flat............................................... 5,454 5,508 5,774 Tank............................................... 491 493 505 Caboose............................................ 389 451 485 Other.............................................. 732 732 734 ------ ------ ------ Total Freight Cars................................. 94,442 95,655 97,307 ====== ====== ====== Domestic Containers.................................. 15,513 15,595 16,230 Trailers............................................. 721 821 834 Domestic Chassis..................................... 5,152 5,273 5,274 Company Service Cars................................. 5,196 6,140 6,084 Commuter Passenger Cars.............................. 141 141 141
In addition to the containers, trailers, and chassis shown above, BNSF Railway had under short-term leases 11,603 containers, 2,157 trailers, and 18,262 chassis, at December 31, 1997. In addition to the owned and leased locomotives identified above, BNSF Railway operated 196 freight locomotives under power-purchase agreements as of December 31, 1997. The average age from date of manufacture of the locomotive fleet at December 31, 1997, was 10.45 years; the average age from date of manufacture or remanufacture of the freight car fleet at December 31, 1997, was 19.93 years. These averages are not weighted to reflect the greater capacities of the newer equipment. CAPITAL EXPENDITURES AND MAINTENANCE BNSF Railway capital expenditures for the periods indicated were as follows (1995 represents pro forma BNSF Railway):
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 ------- ------- ------- (IN MILLIONS) Maintenance of Way Rail........................................... $ 286 $ 188 $ 164 Ties........................................... 230 191 163 Surfacing...................................... 124 130 96 Other.......................................... 334 345 215 ------- ------- ------- Total Maintenance of Way..................... 974 854 638 Equipment........................................ 572 544 284 Terminal and Line Expansion...................... 428 447 335 Merger Related and Other......................... 208 437 98 ------- ------- ------- Total Capital Expenditures....................... $ 2,182 $ 2,282 $ 1,355 Less Non-Cash Capital Expenditures(1)............ -- 48 140 ------- ------- ------- Net Cash Capital Expenditures.................... $ 2,182 $ 2,234 $ 1,215 ======= ======= =======
- -------- (1) Consists primarily of directly financed equipment acquisitions. 2 The above table does not include expenditures for equipment financed through operating leases (principally, locomotives and rolling stock). BNSF expects 1998 capital expenditures for BNSF Railway to be slightly over $2.0 billion. Approximately $1.1 billion of these expenditures will be for maintaining BNSF's track, signals, bridges and tunnels, and to overhaul locomotives and freight cars. The remainder will be spent on terminal and line expansions, information system projects and an additional 180 locomotives. In addition to these capital expenditures on new locomotives, BNSF Railway will acquire 200 new locomotives under long-term leases in 1998. As of December 31, 1997, General Electric Company, the Electro-Motive Division of General Motors Corporation and Boise Locomotive Corporation performed locomotive maintenance and overhauls for BNSF Railway under various maintenance agreements that covered approximately 2,000 locomotives. These agreements require the work to be done at BNSF Railway's facilities using BNSF Railway employees. The majority of maintenance of way expenditures for track have been for rail and tie refurbishment and track resurfacing. The extent of the BNSF Railway track maintenance program (1995 represents pro forma BNSF Railway) is depicted in the following table:
YEAR ENDED DECEMBER 31, -------------------- 1997 1996 1995 ------ ------ ------ Track miles of rail laid: (1)........................ 1,035 1,139 945 Cross ties inserted (thousands)(1)................... 2,941 3,768 2,974 Track resurfaced (miles)(1).......................... 12,430 12,033 11,088
- -------- (1) Includes expenditures for both maintenance of existing route system and expansion projects. These expenditures are primarily capitalized. BNSF Railway anticipates that the 1998 track maintenance of way program, together with expansion projects, will result in the installation of approximately 1,000 track miles of rail, the replacement of about 3 million ties, and the resurfacing of approximately 11,000 miles of track. PROPERTY AND FACILITIES BNSF Railway operates facilities and equipment to maintain its track, locomotives and freight cars. It also owns or leases other equipment to support rail operations, such as highway trailers, containers and vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas, computers, telecommunications equipment, signal systems, and other support systems. Transfer facilities are maintained for rail-to-rail as well as intermodal transfer of containers, trailers and other freight traffic. These include 39 major intermodal hubs located across the system and nine intermodal hub centers off-line used in connection with haulage agreements with other railroads. BNSF Railway's largest intermodal facilities in terms of 1997 volume are:
INTERMODAL FACILITIES UNITS --------------------- ------- Hobart Yard (Los Angeles)......................................... 824,000 Corwith Yard (Chicago)............................................ 663,000 Willow Springs (Illinois)......................................... 555,000 Chicago Hub Center (Cicero, Illinois)............................. 403,000 Alliance (Texas).................................................. 353,000 Seattle International Gateway (SIG)............................... 207,000 Tacoma............................................................ 195,000
BNSF Railway owns 28 automotive distribution facilities where automobiles are loaded or unloaded from multi-level rail cars and serves eight port facilities. Argentine Yard in Kansas City, Kansas, Barstow Yard in Barstow, California, and Northtown Yard in Minneapolis, Minnesota are BNSF Railway's largest freight car classification yards. 3 A substantial portion of all railroad property, real or personal, owned by BNSF Railway is subject to liens securing, as of December 31, 1997, approximately $467 million of mortgage bonds. Certain locomotives and rolling stock of BNSF Railway are subject to equipment obligations, as referred to in Note 12 to the consolidated financial statements on page 31 of BNSF's 1997 Annual Report to Shareholders, which information is hereby incorporated by reference. EMPLOYEES AND LABOR RELATIONS Productivity as measured by revenue ton miles per employee has risen steadily in the last three years, while compensation and benefits expense per revenue ton mile declined from 1995 to 1996, and increased from 1996 to 1997, as shown in the table below (1995 represents pro forma BNSF Railway):
YEAR ENDED DECEMBER 31, -------------------- 1997 1996 1995 ------ ------ ------ Thousand revenue ton-miles divided by average number of employees................................................ 9,769 9,398 8,968 Compensation and benefits expense per thousand revenue ton-miles................................................ $ 6.30 $ 6.23 $ 6.61
Labor unions represent approximately 88 percent of BNSF Railway employees under collective bargaining agreements with 13 different labor organizations. The collective bargaining agreements reached in 1996 and 1997 as a result of industry-wide and certain local labor contract negotiations will remain in effect through at least December 31, 1999 and until new agreements are reached or the Railway Labor Act's procedures are exhausted. Railroad industry personnel are covered by the Railroad Retirement System instead of Social Security. BNSF Railway's contributions under the Railroad Retirement System are approximately triple those in industries covered by Social Security. Railroad industry personnel are also covered by the Federal Employers' Liability Act ("FELA") rather than by state workers' compensation systems. FELA is a fault-based system, with compensation for injuries settled by negotiation and litigation, not subject to specific statutory limitations on the amount of recovery. By contrast, most other industries are covered under state administered no-fault plans with standard compensation schedules. BNSF Railway believes it has adequate reserves for its FELA claims. However, the future costs of FELA claims are uncertain and such costs could be significantly higher in the future. BUSINESS MIX In serving the Midwest, Pacific Northwest and the Western, Southwestern, and Southeastern regions and ports of the country, BNSF Railway transports a range of commodities derived from manufacturing, agricultural, and natural resource industries. Accordingly, its financial performance is influenced by, among other things, general and industry economic conditions at the international, national, and regional levels. Major markets served directly by BNSF Railway include Albuquerque, Amarillo, Billings, Birmingham, Cheyenne, Chicago, Corpus Christi, Dallas, Denver, Des Moines, Duluth/Superior, Fargo/Moorhead, Fort Worth, Galveston, Houston, Kansas City, Lincoln, Little Rock, Los Angeles, Memphis, Mobile, New Orleans, Oklahoma City, Omaha, Phoenix, Portland, Reno, Salt Lake City, San Antonio, the San Francisco Bay area, St. Louis, St. Paul/Minneapolis, Seattle, Spokane, Springfield (Missouri), Tacoma, Tulsa, Wichita, Vancouver (British Columbia), and Winnipeg (Manitoba). Other major cities are served through Intermodal Market Extension ("IMX") terminals located at various off-line points. Major ports served include Galveston, Houston, Long Beach, Los Angeles, New Orleans, Mobile, Portland, Richmond (Oakland), San Diego, Seattle, Duluth/Superior, Tacoma and Vancouver (British Columbia). BNSF Railway also accesses the Mexican market through the United States/Mexico crossings at Brownsville, Eagle Pass and El Paso, Texas and San Diego, California and, through an agreement with the Texas Mexican Railway Company, reaches Laredo, Texas, a major border crossing point. In 1997, approximately 27 percent of revenues were derived from Intermodal traffic and approximately 23 percent were derived from the transportation of Coal. About 13 percent of 1997 revenues reflected the 4 transportation of Agricultural Commodities, with the balance largely accounted for by the Chemicals, Forest Products, Consumer Goods, Metals, Automotive, and Minerals business groups. Intermodal. The Intermodal freight business consists of the hauling of freight containers or truck trailers by combinations of water, rail, or motor carriers. The intermodal business is highly service-driven, and in many cases motor carriers and railroads work jointly to provide intermodal service. The first such joint intermodal arrangement was Quantum, through which BNSF Railway and J. B. Hunt Transport provide customers full service, customized door-to-door transportation (truck and rail), with a common communication system and integrated billing at a single rate. Intermodal 1997 results include revenue from four types of business: . Direct Marketing. Direct marketing efforts resulted in approximately 33 percent of total intermodal revenue. These center around traffic contracted from United Parcel Service and the United States Postal Service, and service for nationwide LTL (Less-Than-Truckload) carriers including Yellow Freight, Roadway Express, and Consolidated Freightways. . Truckload. Truckload traffic represented approximately 15 percent of total intermodal revenue. The joint service arrangement with J.B. Hunt, referred to as Quantum, represented the largest truckload component, while Schneider National was the next largest. . Intermodal Marketing Companies. Approximately 25 percent of total intermodal revenue was generated through intermodal marketing companies, primarily shipper agents and consolidators. . International. International business consists primarily of traffic from steamship companies and accounted for approximately 27 percent of intermodal revenues. Coal. Based on carloadings and tons hauled, BNSF Railway is the largest transporter of western low-sulfur coal in the United States. Approximately 90 percent of BNSF Railway's coal traffic originated in the Powder River Basin of Wyoming and Montana during the three years ended December 31, 1997. These coal shipments were destined for coal-fired electric generating stations located primarily in the North Central, South Central and Mountain regions of the United States. BNSF Railway also transports increasing amounts of low-sulfur coal from the Powder River Basin for delivery to markets in the eastern and southeastern portion of the United States. The low-sulfur coal from the Powder River Basin is abundant, inexpensive to mine and clean-burning. Because the Clean Air Act of 1990 requires power plants to reduce harmful emissions either by burning coal with a lower sulfur content or by installing expensive scrubbing units by the year 2000, opportunities for increased shipments of this low-sulfur coal still exist. Also, deregulation in the electric utility industry is expected to cause utilities to seek lower cost fuel sources and boost demand for Powder River Basin coal. Other coal shipments originate principally in Wyoming, Colorado, and New Mexico and are moved to electrical generating stations and industrial plants in the Midwest and Southwest. Agricultural Commodities. Agricultural Commodities include barley, corn, wheat, soybeans, oils, feeds, flour and mill products, specialty grains, malts, and milo. The BNSF Railway system is strategically located to serve the Midwest and Great Plains grain-producing regions where BNSF Railway serves most major terminal, storage, feeding and food-processing locations. Additionally, BNSF Railway has access to major export markets in the Pacific Northwest, western Great Lakes and Texas Gulf regions. Chemicals. The Chemicals business is comprised of fertilizer, petroleum and chemical commodities. Chemicals and plastics resins are transported for industrial and agricultural use. Industrial chemicals and plastics resins are used by the automotive, housing, and packaging industries, as well as for feedstocks to produce other chemical and plastic products. Access to significant additional chemicals producers along the Louisiana and Texas Gulf Coasts was gained as a result of the agreement and conditions resulting from the merger of the Union Pacific and Southern Pacific railroads. Agricultural minerals include sulphur that generally moves to the Gulf 5 Coast and from there via vessels to Florida and overseas markets for use in making phosphatic fertilizers. Potash is transported to domestic markets and to export points for markets in Canada, Mexico, and overseas. Forest Products. The primary commodities in Forest Products are lumber, plywood, oriented strand board, paper products, pulpmill feedstock, and wood pulp. Based on carloadings and tonnage hauled, BNSF Railway is the largest rail transporter of forest products in the United States. Commodity origins are primarily from the Pacific Northwest, upper Midwest, and the Southeast for shipment mainly into domestic markets. Industries served include construction, furniture, photography, publishing, newspaper, and industrial packaging. Consumer Goods. Beverages, canned goods, and perishables are the principal food commodities moved by BNSF Railway. Other consumer products handled include sugars and sweeteners, cotton, salt, rubber and tires, machinery, aircraft parts, military and miscellaneous boxcar shipments. Shipments of waste, ranging from municipal waste to contaminated soil, move to landfills and reclamation centers across the country. Metals. The Metals business serves virtually all of the commodities included in or resulting from the production of steel. Taconite, an iron ore derivative produced in northern Minnesota, scrap steel, and coal coke are BNSF Railway's primary input products, while finished steel products range from structural beams and steel coils to wire and nails. BNSF Railway also hauls both ferrous and non-ferrous products including recyclable metals. BNSF Railway links the integrated steel mills in the East with fabricators in the West and Southwest. Service is also provided to various mini-mills in the Southwest that produce rebar, beams, and coiled rod to the construction industry. Various non-ferrous products such as copper, lead, and aluminum are transported for the beverage, automotive, and telecommunications industries. Automotive. The Automotive group is responsible for both assembled motor vehicles and shipments of vehicle parts to numerous destinations throughout the Midwest, Southwest, West and Pacific Northwest. Minerals. Commodities in this group include clays, sands, cements, aggregates, sodium compounds and other industrial minerals. Both the oil and the construction industries are serviced. Industrial minerals include various mined and processed commodities such as cement and aggregates (construction sand, gravel and crushed stone) that generally move to domestic markets for use in general construction and public work projects, including highways. Borates and clays move to domestic points as well as to export markets primarily through West Coast ports. Sodium compounds, primarily soda ash, is moved to domestic markets for use in the manufacturing of glass and other industrial products. Sand is utilized in the manufacturing of glass and for use in foundry and oil drilling applications. Freight Statistics. The following tables set forth certain freight statistics relating to rail operations for the periods indicated. Amounts shown for 1995 represent pro forma BNSF Railway; certain amounts have been reclassified to reflect changes in the business groups and to conform to current year presentation.
YEAR ENDED DECEMBER 31, -------------------------- 1997 1996 1995 -------- -------- -------- Revenue ton-miles (millions).................. 424,588 411,059 409,418 Freight revenue per thousand revenue ton- miles........................................ $ 19.81 $ 19.71 $ 19.69 Average haul per ton (miles).................. 935 875 864
6 REVENUES
YEAR ENDED DECEMBER 31, -------------------- 1997 1996 1995 ------ ------ ------ (IN MILLIONS) Intermodal........................................... $2,282 $2,039 $1,949 Coal................................................. 1,972 1,973 1,962 Agricultural Commodities............................. 1,087 1,171 1,290 Chemicals............................................ 793 765 712 Forest Products...................................... 573 556 557 Consumer Goods....................................... 505 470 486 Metals............................................... 424 413 397 Automotive........................................... 422 396 396 Minerals............................................. 352 319 313 ------ ------ ------ Total Freight Revenue................................ 8,410 8,102 8,062 Other Revenue........................................ 3 39 35 ------ ------ ------ Total Revenues................................... $8,413 $8,141 $8,097 ====== ====== ======
CARS/UNITS
YEAR ENDED DECEMBER 31, ----------------- 1997 1996 1995 ----- ----- ----- (IN THOUSANDS) Intermodal.............................................. 2,854 2,570 2,527 Coal.................................................... 1,862 1,854 1,878 Agricultural Commodities................................ 577 587 664 Chemicals............................................... 467 448 435 Forest Products......................................... 335 334 347 Consumer Goods.......................................... 349 308 332 Metals.................................................. 374 391 399 Automotive.............................................. 264 251 264 Minerals................................................ 263 249 257 ----- ----- ----- Total Car/Units..................................... 7,345 6,992 7,103 ===== ===== =====
AVERAGE REVENUE PER CAR/UNIT
YEAR ENDED DECEMBER 31, -------------------- 1997 1996 1995 ------ ------ ------ Intermodal.......................................... $ 800 $ 793 $ 771 Coal................................................ 1,059 1,064 1,045 Agricultural Commodities............................ 1,884 1,995 1,943 Chemicals........................................... 1,698 1,708 1,637 Forest Products..................................... 1,710 1,665 1,605 Consumer Goods...................................... 1,447 1,526 1,464 Metals.............................................. 1,134 1,056 995 Automotive.......................................... 1,598 1,578 1,500 Minerals............................................ 1,338 1,281 1,218 ------ ------ ------ AVERAGE REVENUE PER CAR/UNIT.................... $1,145 $1,159 $1,135 ====== ====== ======
7 GOVERNMENT REGULATION AND LEGISLATION Rail operations are subject to the regulatory jurisdiction of the Surface Transportation Board of the United States Department of Transportation ("DOT"), the Federal Railroad Administration of DOT, the Occupational Safety and Health Administration ("OSHA"), and state regulatory agencies. The Surface Transportation Board, which is the successor to the Interstate Commerce Commission, has jurisdiction over certain rates, routes, and services, the extension, sale, or abandonment of rail lines, and consolidation or merger with, or acquisition of control of, rail common carriers. DOT and OSHA have jurisdiction under several federal statutes over a number of safety and health aspects of rail operations. State agencies regulate some aspects of rail operations with respect to health and safety in areas not otherwise preempted by federal law. BNSF Railway's rail operations, as well as those of its competitors, are subject to extensive federal, state and local environmental regulation. These laws cover discharges to waters, air emissions, toxic substances, and the generation, handling, storage, transportation, and disposal of waste and hazardous materials. This regulation has the effect of increasing the cost and liabilities associated with rail operations. Environmental risks are also inherent in rail operations which frequently involve transporting chemicals and other hazardous materials. The railroad industry, including BNSF Railway, will become subject to future requirements regulating air emissions from diesel locomotives that will increase operating and capital costs. Regulations applicable to new and rebuilt locomotives were issued by the United States Environmental Protection Agency ("EPA") in December 1997. These regulations, which are not yet effective, will be phased in between 2000 and 2010. Under some interpretations of federal law, older locomotive engines may be regulated by states based on standards and procedures which the State of California ultimately adopts. The State of California has previously indicated to the EPA that it will support the federal rule as proposed subject to slight technical modifications; the regulations issued in December 1997 are similar in most respects to the proposed regulations. Many of BNSF Railway's land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF Railway is now subject and will from time to time continue to be subject to environmental cleanup and enforcement actions. In particular, the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, generally imposes joint and several liability for cleanup and enforcement costs, without regard to fault or the legality of the original conduct, on current and former owners and operators of a site. Accordingly, BNSF Railway may be responsible under CERCLA and other federal and state statutes for all or part of the costs to clean up sites at which certain substances may have been released by BNSF Railway, its current lessees, former owners or lessees of properties, or other third parties. For further discussion, reference is made to Note 15 to the consolidated financial statements on pages 33 and 34 of BNSF's 1997 Annual Report to Shareholders, which information is hereby incorporated by reference. COMPETITION The business environment in which BNSF Railway operates remains highly competitive. Depending on the specific market, deregulated motor carriers, other railroads and river barges exert pressure on various price and service levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty mileage continues to affect the market for non-bulk, time sensitive freight. The potential expansion of longer combination vehicles could further encroach upon markets traditionally served by railroads. In order to remain competitive, BNSF Railway and other railroads continue to develop and implement operating efficiencies to improve productivity. As railroads streamline, rationalize and otherwise enhance their franchises, competition among rail carriers intensifies. BNSF Railway's primary rail competitor in the western region of the United States is Union Pacific Railroad Company ("UP"), which now includes the former Southern Pacific Transportation Company ("SP") and Chicago & North Western Transportation Company. Other Class I railroads and numerous regional railroads 8 and motor carriers also operate in parts of the same territories served by BNSF Railway. Coal, one of BNSF Railway's primary commodities, has experienced significant pressure on rates due to competition from the effort of UP as well as from BNSF Railway's effort to penetrate new markets. The Surface Transportation Board ("STB") approved the proposed common control and merger of rail carriers controlled by UP and SP in its written decision dated August 12, 1996, and the transaction was consummated on September 11, 1996. As a condition of the merger, BNSF Railway gained rights to approximately 4,000 miles of track and purchased more than 335 miles of track from UP/SP. Additionally, in late 1997, BNSF was granted temporary access to additional UP/SP lines in the Gulf Coast area by order of the STB. Approval of the UP/SP transaction created an enhanced competitor to BNSF Railway. The Board's decision also provided BNSF Railway with greater access to Gulf Coast and West Coast markets and improved its route structure. On February 13, 1998, BNSF Railway and UP announced their agreement to exchange half interests in the two pieces of the former SP rail line between Houston and New Orleans now separately owned by the two railroads. Under the agreement, both railroads will have access to all customers, including chemical, steel, gas and other companies, along the entire line, including former SP branch lines. The two railroads also agreed to set up a joint regional dispatching center at Spring, Texas in March 1998 for all of their Gulf Coast train operations in order to better manage train flows in and through Houston. BNSF is monitoring the proposed disposition of Consolidated Rail Corporation (Conrail) between CSX Corporation and Norfolk Southern Corporation and related filings with the STB to determine the impact, if any, on BNSF Railway. Conrail, CSX and Norfolk Southern operate the three largest rail systems in the eastern United States. In February 1998, Canadian National Railway Company ("CN") and Illinois Central Corporation ("IC") entered into a definitive agreement under which CN will acquire IC, subject to STB approval. CN is Canada's largest railroad and reaches the U.S. cities of Detroit and Chicago, while IC has operations extending from Chicago to the Gulf of Mexico, and west through Iowa. BNSF is monitoring the CN/IC proceeding before the STB to determine any potential competitive impacts. PIPELINE INVESTMENT Santa Fe Pacific Pipelines, Inc. ("SFP Pipelines"), an indirect, wholly- owned subsidiary of BNSF, served as the general partner of Santa Fe Pacific Pipeline Partners, L.P. (the "Partnership") and of its operating partnership subsidiary, SFPP, L.P. SFP Pipelines owned a two percent interest as the Partnership's and SFPP, L.P.'s general partner and an approximate 42 percent interest as limited partner of the Partnership. As general partner, SFP Pipelines received two percent of all amounts available for distribution by the Partnership and an additional incentive depending upon the level of cash distributions paid to holders of limited partner interests in the Partnership ("Partnership Units"). SFP Pipeline Holdings, Inc., an indirect, wholly-owned subsidiary of BNSF ("SFP Holdings"), had outstanding $219 million principal amount of Variable Rate Exchangeable Debentures due 2010 (the "VREDs") at December 31, 1997. The VREDs were exchangeable under certain circumstances or at final maturity, for substantially all of the Partnership Units owned by SFP Pipelines. On October 18, 1997, SFP Pipelines and SFP Holdings entered into an agreement with Kinder Morgan Energy Partners, L.P. ("Kinder Morgan") pursuant to which Kinder Morgan acquired substantially all of SFP Pipelines' interests in the Partnership and SFPP, L.P. for approximately $84 million on March 6, 1998. In addition, the agreement called for the interest of SFP Pipelines in SFPP, L.P. to be partially redeemed for a cash distribution of $5.8 million, with SFP Pipelines retaining only a .5% special limited partnership interest in SFPP, L.P. Consummation of the transaction caused an "Exchange Event" under the VRED agreement and VRED holders became eligible to receive either cash equal to the par value of the VREDs or substantially all of the Kinder Morgan units received by SFP Pipelines in exchange for its Partnership Units. Kinder Morgan has agreed to pay and perform all obligations of SFP Holdings related to the VREDs and has agreed to indemnify and hold harmless BNSF and its subsidiaries from and against any and all losses, costs, damages, expenses, liabilities and claims arising or resulting from or relating to, among other things, the Partnership, SFPP, L.P. or the VREDs. 9 ITEM 3. LEGAL PROCEEDINGS Set forth below is a description of certain legal proceedings involving BNSF and its subsidiaries. WHEAT AND BARLEY TRANSPORTATION RATES In September 1980, a class action lawsuit was filed against BNSF Railway in United States District Court for the District of Montana ("Montana District Court") challenging the reasonableness of BNSF Railway export wheat and barley rates. The class consists of Montana grain producers and elevators. The plaintiffs sought a finding that BNSF Railway single car export wheat and barley rates for shipments moving from Montana to the Pacific Northwest were unreasonably high and requested damages in the amount of $64 million. In March 1981, the Montana District Court referred the rate reasonableness issue to the ICC. Subsequently, the state of Montana filed a complaint at the ICC challenging BNSF Railway's multiple car rates for Montana wheat and barley movements occurring after October 1, 1980. The ICC issued a series of decisions in this case from 1988 to 1991. Under these decisions, the ICC applied a revenue to variable cost test to the rates and determined that BNSF Railway owed $9,685,918 in reparations plus interest. In its last decision, dated November 26, 1991, the ICC found BNSF Railway's total reparations exposure to be $16,559,012 through July 1, 1991. The ICC also found that BNSF Railway's current rates were below a reasonable maximum and vacated its earlier rate prescription order. BNSF Railway appealed to the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") those portions of the ICC's decisions concerning the post-October 1, 1980 rate levels. BNSF Railway's primary contention on appeal was that the ICC erred in using the revenue to variable cost rate standard to judge the rates instead of Constrained Market Pricing/Stand Alone Cost principles. The limited portions of decisions that cover pre-October 1, 1980 rates were appealed to the Montana District Court. On March 24, 1992, the Montana District Court dismissed plaintiffs' case as to all aspects other than those relating to pre-October 1, 1980 rates. On February 9, 1993, the D.C. Circuit served its decision regarding the appeal of the several ICC decisions in this case. The court held that the ICC did not adequately justify its use of the revenue to variable cost standard as BNSF Railway had argued and remanded the case to the ICC for further administrative proceedings. On July 22, 1993, the ICC served an order in response to the D.C. Circuit's February 9, 1993 decision. In its order, the ICC stated it would use the Constrained Market Pricing/Stand-Alone Cost principles in assessing the reasonableness of BNSF Railway wheat and barley rates moving from Montana to Pacific Coast ports from 1978 forward. The ICC assigned the case to the Office of Hearings to develop a procedural schedule. On October 28, 1994, plaintiffs filed their opening evidence arguing that the revenue received by BNSF Railway exceeded the stand alone costs of transporting that traffic and that BNSF Railway rates were unreasonably high. BNSF Railway filed its evidence March 29, 1995, showing that the stand alone costs of transporting the traffic exceeded the revenue derived by BNSF Railway on that traffic and that consequently, its rates were not unreasonably high. The parties filed briefs simultaneously on August 16, 1995. In a decision served August 14, 1997, in McCarty Farms, Inc. et al. v. Burlington Northern Inc., No. 37808, the STB, successor to the ICC, found that the challenged rates of BNSF Railway for export wheat and barley were not shown to exceed a maximum reasonable level. The STB dismissed the proceeding in its entirety. Plaintiffs have filed petitions to review the STB decision before the D.C. Circuit and the Montana District Court. The Montana District Court case has been stayed pending decision by the D. C. Circuit Court where oral argument is presently scheduled for September 1998. COAL TRANSPORTATION CONTRACT LITIGATION On April 26, 1991, an action was filed against BNSF Railway in the 102nd Judicial District Court for Bowie County, Texas, seeking a reduction of the transportation rates required to be paid under two contracts (Southwestern Electric Power Company v. Burlington Northern Railroad Company, No. D-102-CV- 91-0720). The plaintiff, Southwestern Electric Power Company ("SWEPCO"), was challenging the contract rates for 10 transportation of coal to its electric generating facilities at Cason, Texas, and Flint Creek, Arkansas. SWEPCO contended that productivity gains achieved by BNSF Railway constituted unusual economic conditions giving rise to a "gross inequity" because BNSF Railway's costs of providing service have been reduced over the contracts' terms. On August 2, 1994, plaintiff amended its complaint to further allege that BNSF Railway had been unjustly enriched by retaining differences between the rates actually charged and those that SWEPCO alleged should have been charged. SWEPCO sought both prospective rate relief and recovery of alleged past overcharges. BNSF Railway's primary contention was that both parties anticipated productivity gains in the rail industry when negotiating the contracts and agreed that BNSF Railway would retain most of its productivity gains. BNSF Railway further contended that there was no agreement that transportation rates paid by SWEPCO would be based on BNSF Railway's cost of providing service. On November 18, 1994, the jury rendered a verdict denying plaintiff's request for prospective rate relief and that plaintiff take nothing on its principal claims of "gross inequity." However, BNSF Railway was assessed damages approximating $56 million relating to plaintiff's alternative claim of unjust enrichment. On January 20, 1995, the trial court rendered a judgment on the verdict in an amount approximating $74 million, which included attorneys' fees and interest. The judgment further awarded post-judgment interest at 10 percent per annum and issued declaratory orders pertaining to the two contracts. BNSF Railway filed its notice of appeal in the case on February 17, 1995 and posted a bond staying enforcement of the judgment in the Court of Appeals for the Sixth Court of Appeals District of Texas, Texarkana, Texas (Burlington Northern Railroad Company v. Southwestern Electric Power Company, No. 06-95-00024-CV). By decision dated April 30, 1996, the Court of Appeals reversed the judgment of the trial court and rendered judgment in favor of BNSF Railway. SWEPCO was assessed costs of appeal, and was denied two motions for rehearing before the Court of Appeals. The Texas Supreme Court subsequently granted SWEPCO's application for discretionary review of the appellate decision. The matter was argued on October 8, 1997. On March 13, 1998, the Texas Supreme Court affirmed the judgment of the Court of Appeals in all respects. ENVIRONMENTAL PROCEEDINGS BNSF Railway has been advised that it is a target of a Grand Jury investigation in the United States District Court for the Eastern District of Missouri with respect to former railcar cleaning activities conducted by independent contractors at Cherryville, Missouri. The proceeding relates to alleged violations of federal environmental protection statutes with respect to lead contamination at several sites in the Cherryville area. In addition, BNSF Railway has received personal injury claims from certain individuals formerly residing at or near some of these sites. The Missouri Department of Natural Resources ("DNR") also is investigating the matter with respect to possible violations of state environmental protection laws and has indicated that it may seek a civil penalty from BNSF Railway. BNSF Railway and another potentially responsible party had previously prepared investigation and remediation plans in conjunction with the DNR. BNSF Railway modified the plans and is expediting and implementing a response with DNR approval. On December 18, 1995, the State of Illinois filed a Complaint captioned People of the State of Illinois v. Burlington Northern Railroad Company, Beazer East, Inc. and Koppers Industries, Inc. (PCB No. 96-132) before the Illinois Pollution Control Board against BNSF Railway, Beazer East, Inc. and Koppers Industries, Inc. alleging violations of the Illinois Environmental Protection Act with respect to a facility in Galesburg, Illinois. This facility is not operated by BNSF Railway. The proceeding may result in monetary sanctions in excess of $100,000. BNSF Railway and Beazer East, Inc. have made an offer to the State of Illinois to settle this matter. On December 30, 1996, BNSF Railway was named a defendant in a lawsuit by the Wisconsin Department of Natural Resources (State of Wisconsin v. Burlington Northern Railroad Company, Case No. 96 CV403, Circuit Court, Douglas County) in connection with two separate matters in Superior, Wisconsin. One of the matters involves the alleged obligation to close a waste water holding pond located on property which BNSF Railway does not own. The State alleges that BNSF Railway is an owner or operator of the pond and is subject to the 11 obligation because of its discharge of treated wastewater into the pond. The other matter relates to petroleum impacts to property formerly owned by BNSF Railway. The current owner discovered the petroleum and debris when excavating the property. It is possible that BNSF Railway will be required to pay monetary sanctions to the State in excess of $100,000 in connection with the resolution of these two matters. MERGER-RELATED LITIGATION Numerous complaints were filed arising out of the Agreement and Plan of Merger dated June 29, 1994, as amended, between BNI and SFP. On June 30, 1994, shortly after announcement of the proposed BNI-SFP merger ("Merger"), two purported stockholder class action suits were filed in the Court of Chancery of the State of Delaware (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587; Cosentino v. Santa Fe Pacific Corporation, C.A. No. 13588). On July 1, 1994, two additional purported stockholder class action suits were filed in the Court of Chancery of the State of Delaware (Fielding v. Santa Fe Pacific Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific Corporation, C.A. No. 13597). The actions named as defendants SFP, the individual members of the SFP Board of Directors, and BNI. In general, the actions variously alleged that SFP's directors breached their fiduciary duties to the stockholders by agreeing to the proposed merger for allegedly "grossly inadequate" consideration in light of recent operating results of SFP, recent trading prices of SFP's common stock and other alleged factors, by allegedly failing to take all necessary steps to ensure that stockholders will receive the maximum value realizable for their shares (including allegedly failing to actively pursue the acquisition of SFP by other companies or conducting an adequate "market check"), and by allegedly failing to disclose to stockholders the full extent of the future earnings potential of SFP, as well as the current value of its assets. The Miller and Fielding cases further alleged that the proposed Merger was unfairly timed and structured and, if consummated, would allegedly unfairly deprive the stockholders of standing to pursue certain pending stockholder derivative litigation. Plaintiffs also alleged that BNI was responsible for aiding and abetting the alleged breach of fiduciary duty committed by the SFP Board. The actions sought certification of a class action on behalf of SFP's stockholders. In addition, the actions sought injunctive relief against consummation of the Merger and, in the event that the Merger was consummated, the rescission of the Merger, an award of compensatory or rescissory damages and other damages, including court costs and attorneys' fees, an accounting by defendants of all profits realized by them as a result of the Merger, and various other forms of relief. On October 6, 1994, shortly after Union Pacific Corporation ("UPC") issued a press release in which it announced a proposal for UPC to acquire SFP (the "UPC Proposal"), plaintiffs in the four lawsuits described above filed in the Court of Chancery of the State of Delaware a Consolidated Amended Complaint (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In their Consolidated Amended Complaint, plaintiffs repeated the allegations contained in their earlier lawsuits and further alleged that, in light of the UPC Proposal, SFP's directors had breached their fiduciary duties by failing to fully inform themselves about and to adequately explore available alternatives to the merger with BNI, including the alternative of a merger transaction with UPC, and by failing to fully inform themselves about the value of SFP. The Consolidated Amended Complaint sought the same relief sought in plaintiffs' earlier lawsuits and, in addition, requested that SFP's directors be ordered to explore alternative transactions and to negotiate in good faith with all interested persons, including UPC. Also, on October 6, 1994, five additional purported stockholder class action suits relating to SFP's proposed participation in the Merger with BNI were filed in the Court of Chancery of the State of Delaware (Weiss v. Santa Fe Pacific Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No. 13780; Stein v. Santa Fe Pacific Corporation, Lewis v. Santa Fe Pacific Corporation, C.A. No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7, 1994, three more purported stockholder class action suits relating to SFP's proposed participation in the Merger with BNI were filed in the Court of Chancery of the State of Delaware (Graulich v. Santa Fe Pacific Corporation, C.A. No. 13786; Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green v. Santa Fe Pacific Corporation, C.A. No. 13788). All of these lawsuits named as defendants SFP and the individual members of the SFP Board of Directors; the Lifshitz case further named BNI as a defendant. In general, these actions variously alleged that, in light of SFP's recent operating results and the UPC Proposal, SFP's directors 12 breached their fiduciary duties to stockholders by purportedly not taking the necessary steps to ensure that SFP's stockholders would receive "maximum value" for their shares of SFP stock, including purportedly refusing to negotiate with UPC or to "seriously consider" the UPC Proposal and failing to announce any active auction or open bidding procedures. The actions generally sought relief that is materially identical to the relief sought in the Miller case, and in addition sought entry of an order requiring SFP's directors to immediately undertake an evaluation of SFP's worth as a merger/acquisition candidate and to establish a process designed to obtain the highest possible price for SFP, including taking steps to "effectively expose" SFP to the marketplace in an effort to create an "active auction" in SFP. The Weiss case further sought entry of an order enjoining SFP's directors from implementing any poison pill or other device designed to thwart the UPC Proposal or any other person's proposal to acquire SFP. The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the Chancery Court entered an order consolidating the remaining 11 purported stockholder class action suits under the heading In Re Santa Fe Pacific Corporation Shareholder Litigation, C.A. No. 13587 (the "Shareholder Litigation"). On October 26, 1994, BNI filed a Motion to Dismiss the Consolidated and Amended Complaint. On March 6, 1995, plaintiffs in the Shareholder Litigation filed a Revised Second Consolidated and Amended Complaint, which superseded their previously filed complaints. The Revised Second Consolidated and Amended Complaint generally repeated many of the same allegations, and requested relief similar to that requested in plaintiffs' earlier complaints. In addition, the Revised Second Consolidated and Amended Complaint alleged that SFP's directors breached their fiduciary duties: by proceeding with and completing the joint SFP-BNI Tender Offer; by approving and implementing the Shareholder Rights Plan, which purportedly resulted in a "premature ending" of the "bidding process" by allegedly deterring and defeating UPC's acquisition overtures, exempting BNI from its provisions, and "coercing" SFP stockholders to vote in favor of the Merger; by approving the termination fee and expense reimbursement provisions of the Merger Agreement by authorizing the stock repurchase provisions of the Merger Agreement, which allegedly were designed to "lock-up" the Merger by providing stockholders with an "illusory promise" that the Merger Agreement exchange ratio would increase, while reserving SFP's right not to repurchase such stock; and by purportedly failing to disclose all material facts necessary for SFP's stockholders to evaluate in an informed manner and vote on the Merger, including purportedly failing to fully disclose the risks that the ICC would not approve the Merger and purportedly failing to fully disclose SFP's intentions with respect to the repurchase of SFP stock, as permitted by the Merger Agreement, as well as whether there will be a fair opportunity for all SFP stockholders to "participate" in any SFP stock repurchases, and on what basis. As additional relief to that requested in the earlier complaints, plaintiffs requested injunctive and other relief: enjoining consummation of the Merger; ordering SFP, SFP's directors, and BNI to make unspecified supplemental disclosures to stockholders; requiring SFP to conduct a new vote on the Merger subsequent to such disclosures; enjoining SFP from improperly or discriminatorily implementing the Shareholder Rights Plan or any other "defensive" tactic; ordering SFP's directors to take all appropriate steps to enhance SFP's value and attractiveness as a merger or acquisition candidate, including "effectively exposing" SFP to the marketplace by means of an active auction on a "level playing field"; and declaring the termination fee and expense reimbursement provisions of the Merger Agreement invalid and unenforceable. On March 13, 1995, SFP and SFP's directors filed a motion to dismiss the Shareholder Litigation on the grounds that the Plaintiffs failed to state a cause of action upon which relief may be granted. BNI also filed a motion to dismiss the Revised Second Consolidated and Amended Complaint. On May 31, 1995, the Delaware Chancery Court rendered its decision granting the motion to dismiss that was filed by SFP and SFP's directors on March 13, 1995 and the motion to dismiss filed by BNI. The plaintiffs appealed the dismissal to the Delaware Supreme Court. On November 22, 1995, the Delaware Supreme Court issued an opinion that affirmed in part and reversed in part the May 31, 1995 decision of the Delaware Chancery Court. The Delaware Supreme Court reversed the Chancery Court's dismissal of plaintiffs' claims that, in taking the alleged "defensive" actions identified in the 13 Revised Second Consolidated and Amended Complaint, including approval and implementation of the Shareholder Rights Plan, SFP's directors violated their fiduciary duties to stockholders. The Delaware Supreme Court affirmed the Chancery Court's dismissal of all other claims asserted by plaintiffs in the litigation, including all claims against BNI. On December 11, 1995, the SFP defendants filed with the Delaware Chancery Court a motion for summary judgment against plaintiffs' remaining claims in the Shareholder Litigation, which motion is pending. On December 29, 1995, the SFP defendants filed their Answer to plaintiffs' Revised Second Consolidated and Amended Complaint. BNSF believes this lawsuit is meritless and continues to oppose it vigorously. CROW RESERVATION CROSSING ACCIDENT CASE In November 1993, there was an accident at a BNSF Railway crossing located within the boundaries of the Crow reservation in which three members of the Crow tribe were killed. The crossing, which is located on a rural gravel road just south of Lodge Grass, Montana, was protected by crossbucks and advance warning signs. A lawsuit was filed in the Crow Tribal Court (Estates of Red Wolf, Red Horse and Bull Tail v. Burlington Northern Railroad Company, Case No. 94-31) on behalf of the estates of the driver and the two passengers. One of the passenger cases was severed and has yet to go to trial. The other two cases proceeded to trial in January 1996 and, on February 6, 1996, a Crow Tribal Court jury rendered a verdict against BNSF Railway for compensatory damages in the total amount of $250 million. On August 19, 1997, pursuant to the request of plaintiffs, the Tribal Court entered an amended judgment reducing the amount of the judgment from $250 million to $25 million. BNSF Railway has filed an appeal to the Crow Court of Appeals in and for the Crow Indian Reservation seeking, among other things, to have the case dismissed on the basis that the Crow Tribal Court lacks subject matter jurisdiction over these claims. If the appellate court fails to grant relief to BNSF Railway, BNSF Railway will pursue its defenses in federal court. On February 26, 1996, the Federal District Court for the District of Montana entered an order enjoining any action by the Tribal Court plaintiffs to enforce the judgment pending appeal through the tribal court and federal court systems. BNSF Railway was required to post a $5 million bond with the federal court. The Tribal Court plaintiffs appealed that decision to the United States Court of Appeals for the Ninth Circuit. On January 29, 1997, the Ninth Circuit issued an opinion which reversed the district court and remanded the matter to that trial court with directions to dissolve the injunction. The basis for the appellate court's decision was a determination that BNSF Railway had failed to exhaust its remedies in the tribal court. Following denial of BNSF Railway's petition for rehearing, BNSF Railway petitioned the United States Supreme Court for a writ of certiorari with respect to the Ninth Circuit's decision on May 16, 1997. On October 6, 1997, the Supreme Court issued an order in which it granted BNSF Railway's petition, vacated the Ninth Circuit's judgment and remanded the case to the Ninth Circuit for further consideration in light of the Supreme Court's decision in Strate v. A-1 Contractors, 117 S. Ct. 1404 (1997). In light of the reduction of the judgment against BNSF Railway to $25 million, this matter is no longer considered a possible material legal proceeding and therefore no further information will be given as to this matter. OTHER CLAIMS BNSF and its subsidiaries also are parties to a number of other legal actions and claims, various governmental proceedings and private civil suits arising in the ordinary course of business, including those related to environmental matters and personal injury claims. While the final outcome of these and other legal actions referred to under Item 3 of this Report on Form 10-K cannot be predicted with certainty, considering among other things the meritorious legal defenses available, it is the opinion of BNSF management that none of 14 these items, when finally resolved, will have a material adverse effect on the annual results of operations, financial position or liquidity of BNSF, although an adverse resolution of a number of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year. Reference is made to Note 6 to the consolidated financial statements on page 29 of BNSF's 1997 Annual Report to Shareholders for information concerning certain pending administrative appeals with the Internal Revenue Service, which information is hereby incorporated by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by BNSF to a vote of its securities holders during the fourth quarter of 1997. EXECUTIVE OFFICERS OF THE REGISTRANT Listed below are the names, ages, and positions of all executive officers of BNSF (excluding Robert D. Krebs, an executive officer who is also a director of BNSF, information as to whom is included in BNSF's Proxy Statement dated March 9, 1998) and their business experience during the past five years. Executive officers hold office until their successors are elected or appointed, or until their earlier death, resignation, or removal. DOUGLAS J. BABB, 45 Senior Vice President-Merchandise Business Unit since August 1997. Prior to that, Senior Vice President and Chief of Staff from September 1995 to August 1997, and Vice President and General Counsel of BNRR from December 1986 to September 1995. THOMAS N. HUND, 44 Vice President and Controller since September 1995. Prior to that, Vice President and Controller of SFP from July 1990. JEFFREY R. MORELAND, 53 Senior Vice President-Law and Chief of Staff since February 1998. Prior to that, Senior Vice President-Law and General Counsel from September 1995, and Vice President-Law and General Counsel of SFP from October 1994 to January 1998, and Vice President-Law and General Counsel of ATSF from June 1989 to December 1996. MATTHEW K. ROSE, 38 Senior Vice President and Chief Operations Officer since August 1997. Prior to that, Senior Vice President-Merchandise Business Unit from May 1996, Vice President-Chemicals and Plastics of ATSF and BNRR from January 1996, Vice President, South Region Field Marketing of BNRR from January 1995, Vice President, Automotive of BNRR from June 1994, and General Manager, Automotive Facilities and Technology of BNRR from January 1993. Prior to that, Vice President-Transportation of Triple Crown Services, a subsidiary of Norfolk Southern Corporation. CHARLES L. SCHULTZ, 50 Senior Vice President-Intermodal and Automotive Business Unit since February 1996. Prior to that, Vice President-Intermodal of ATSF and BNRR from September 1995, Vice President-Intermodal of ATSF from January 1994, Vice President- Management Services of ATSF from June 1991, and Vice President-Information Services of ATSF from July 1989. 15 DENIS E. SPRINGER, 52 Senior Vice President and Chief Financial Officer since September 1995. Prior to that, Senior Vice President and Chief Financial Officer of SFP from October 1993 to January 1998, and Senior Vice President, Treasurer and Chief Financial Officer of SFP from January 1992. GREGORY T. SWIENTON, 48 Senior Vice President-Coal and Agricultural Commodities Business Unit since May 1996. Prior to that, Senior Vice President-Consumer and Industrial Business Unit from February 1996, Senior Vice President-Industrial Business Unit from September 1995, Executive Vice President, Intermodal Business of BNRR from June 1994, and Executive Director-Europe and Africa (Brussels) of DHL Worldwide Express (international freight company) from January 1991. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS BNSF's common stock is listed on the New York Stock Exchange under the symbol "BNI." The common stock is also listed on the Chicago Stock Exchange and Pacific Exchange. Information as to the high and low sales prices of such stock for the two years ending December 31, 1997 and the frequency and amount of dividends declared on such stock during such period, is set forth below the heading "Quarterly Financial Data-Unaudited" on page 39 of BNSF's 1997 Annual Report to Shareholders and is hereby incorporated by reference. The approximate number of record holders of the common stock at January 31, 1998 was 64,000. ITEM 6. SELECTED FINANCIAL DATA There is disclosed on page 1 of BNSF's 1997 Annual Report to Shareholders selected financial data of BNSF for each of the last five fiscal years. Such data with respect to the following topics are incorporated by reference to Registrant's Current Report on Form 8-K (Date of earliest event reported: February 6, 1998): Revenues; Operating income; Income before extraordinary item and cumulative effect of change in accounting method; Accounting change/Extraordinary item; Net income; Basic earnings per share; Diluted earnings per share; Dividends declared per common share; Total assets; and Long-term debt and commercial paper, including current portion. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations appearing on pages 13 through 20 of BNSF's 1997 Annual Report to Shareholders is hereby incorporated by reference to Registrant's Current Report on Form 8-K (Date of earliest event reported: February 6, 1998). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK In the ordinary course of business, BNSF utilizes various financial instruments which inherently have some degree of market risk. The quantitative information presented below and the additional qualitative information presented in the Managements Discussion and Analysis of Financial Condition and Results of Operations section of the 1997 Annual Report to Shareholders describe significant aspects of BNSF's financial instrument programs which have material market risk. Interest Rate Sensitivity The table below provides information about BNSF's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations as of December 31, 1997. For debt obligations, the table presents principal cash flows and related weighted average 16 interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the yield curve at the reporting date. Long-term Debt
MATURITY DATE ---------------------------------------- FAIR 1998 1999 2000 2001 2002 THEREAFTER TOTAL VALUE ---- ---- ---- ---- ---- ---------- ------ ------ Fixed Rate Debt (in millions)............ $108 $256 $138 $204 $258 $3,587 $4,551 $4,734 Average Interest Rate. 7.78% 7.46% 6.47% 7.96% 7.16% 7.31% 7.33% -- Variable Rate Debt (in millions)............ -- -- -- -- $738 -- $ 738 $ 738 Average Interest Rate. -- -- -- -- 5.84% -- 5.84% --
In the above table, BNSF has included $668 million of commercial paper borrowings in 2002 maturities. As discussed in Note 12 to the consolidated financial statements contained in the 1997 Annual Report to Shareholders, the commercial paper program is supported by BNSF's $1.5 billion, five-year revolving credit agreement which is scheduled to expire on November 12, 2002. BNSF classified commercial paper borrowings as long-term debt in the consolidated balance sheet at December 31, 1997. Interest Rate Swaps From time to time, BNSF enters into various interest rate hedging transactions for purposes of managing exposure to flucuations in interest rates. At December 31, 1997, BNSF had entered into swap transactions reflected in the table below which fixed the interest rate on its commercial paper debt.
MATURITY DATE ---------- FAIR 1998 1999 TOTAL VALUE(1) ---- ---- ----- -------- Variable to Fixed Swaps (in millions)......... $250 $125 $375 $ (2) Average Pay Rate.............................. 6.04% 6.14% 6.07% -- Average Receive Rate.......................... 5.67% 5.73% 5.69% --
- -------- (1) Represents unrealized loss as of December 31, 1997. Treasury Lock In anticipation of a future debt issuance, BNSF had entered into treasury lock transactions, based on the 30-year U.S. treasury rate, as reflected in the following table as of December 31, 1997.
MATURITY DATE ------------- FAIR 1998 VALUE(1) ------------- -------- Variable to Fixed Lock (in millions)............... $200 $ 0 Average Pay Rate................................... 5.88% --
- -------- (1) Represents unrealized gain (loss) as of December 31, 1997. Commodity Price Sensitivity BNSF has a program to hedge against fluctuations in the price of its diesel fuel purchases. This program includes forward purchases for delivery at fueling facilities, and various commodity swap and collar transactions which are accounted for as hedges. Swap transactions are typically based on the price of pipeline delivery Gulf Coast #2 heating oil and require BNSF to purchase a defined quantity at a defined price. Swap transactions are generally settled in cash with the counterparty. Based on historical information, BNSF believes there is a significant correlation between the market prices of diesel fuel and Gulf Coast #2 heating oil. The table below provides information about BNSF's diesel fuel hedging instruments that are sensitive to changes in commodity prices. For diesel fuel swaps and forward purchase contracts the table presents notional amounts in gallons and the weighted average contract price by contractual maturity date as of December 31, 1997. The prices included in the table below do not include taxes, transportation costs, certain other fuel handling 17 costs and, except for forward contracts, any differences which may occur from time to time between the prices of commodities hedged and the purchase price of BNSFs diesel fuel.
MATURITY DATE ----------------------- 1998 1999 2000 TOTAL FAIR VALUE (1) ------- ------- ------- ------- -------------- Diesel Fuel Swaps: Gallons (in millions)........ 479 302 189 970 $(24) Weighted average price per gallon...................... $0.5384 $0.5207 $0.5174 $0.5288 -- Diesel Fuel Forward Purchase Contracts: Gallons (in millions)........ 144 -- -- 144 $ 2 Weighted average price per gallon...................... $0.4790 -- -- $0.4790 --
- -------- (1) Represents unrealized gain (loss) (in millions) based on the price of Gulf Coast #2 heating oil at December 31, 1997. Additionally, at December 31, 1997, BNSF maintained fuel inventories for use in normal operations which were not material to BNSF's overall financial position and therefore represent no significant market exposure. Equity Price Sensitivity In November 1997, BNSF sold equity put options to an independent third party and received cash proceeds of approximately $1 million. The option contract is for physical settlement on May 5, 1998; however, it permits a net-share or net-cash settlement method at the BNSF's election. The table below presents notional amounts in shares of BNSF common stock and the contract price by contractual maturity date as of December 31, 1997. Common Stock Put Options
MATURITY DATE -------- 1998 FAIR VALUE(1) -------- ------------- Contract Number of Shares.......................... 500,000 $ 0 Option Strike Price................................ $88 --
- -------- (1) Represents unrealized gain (loss) (in millions) as of December 31, 1997. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of BNSF and subsidiary companies, together with the reports thereon, appearing in Part IV of this Report on Form 10-K and on pages 21 through 39 of BNSF's 1997 Annual Report to Shareholders, are hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the directors of BNSF is provided on pages 3 through 5 of BNSF's proxy statement dated March 9, 1998, under the heading "Name, Age and Business Experience of the Company's Nominees for Directors" and the information under that heading is hereby incorporated by reference. Information concerning the executive officers of BNSF (excluding one executive officer who is also a director of BNSF) is included in Part I of this Report. 18 Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is provided in the last paragraph on page 8 of BNSF's Proxy Statement dated March 9, 1998, and that information is hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION Information concerning the compensation of directors and executive officers of BNSF is provided on page 6 under the heading "Directors' Compensation" and pages 15 through 20 under the heading "EXECUTIVE COMPENSATION AND OTHER INFORMATION" in BNSF's proxy statement dated March 9, 1998, and the information under those headings is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning the ownership of BNSF equity securities by management is provided on pages 7 through 8 under the heading "SECURITY OWNERSHIP OF MANAGEMENT" of BNSF's proxy statement dated March 9, 1998, and is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions is provided on page 7 under the heading "Certain Relationships and Related Transactions" of BNSF's proxy statement dated March 9, 1998, and the information under that heading is hereby incorporated by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report:
PAGE -------- 1. Consolidated Financial Statements: Report of Price Waterhouse LLP........................................ [21*] Report of Coopers & Lybrand L.L.P..................................... F-2 Consolidated Statement of Income for the three years ended December 31, 1997............................................................. [22*] Consolidated Balance Sheet at December 31, 1997 and 1996.............. [23*] Consolidated Statement of Cash Flows for the three years ended December 31, 1997.................................................... [24*] Consolidated Statement of Changes In Stockholders' Equity for the three years ended December 31, 1997.................................. [25*] Notes to Consolidated Financial Statements............................ [26-39*]
- -------- (*Incorporated by reference from the indicated pages of BNSF's 1997 Annual Report to Shareholders.) 2. Consolidated Financial Statement Schedules for the three years ended December 31, 1997: Report of Price Waterhouse LLP............................................ F-1 Report of Coopers & Lybrand L.L.P......................................... F-2 Schedule II--Valuation and Qualifying Accounts............................ F-3
Schedules other than that listed above are omitted because they are not required or applicable, or the required information is included in the consolidated financial statements or related notes. 19 3. Exhibits: See Index to Exhibits on pages E-1E-4 for a description of the exhibits filed as a part of this Report. (b) Reports on Form 8-K BNSF filed the following Current Reports on Form 8-K during the quarter ended December 31, 1997, or subsequently: Current Report on Form 8-K (Date of earliest event reported: February 6, 1998) which referenced under Item 5, Other Events, and filed as an exhibit under Item 7, Financial Statements, Pro Forma Financial Information and Exhibits, the following material from the registrant's 1997 Annual Report to Shareholders: Consolidated Financial Highlights, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Consolidated Financial Statements and Footnotes and Report of Management and Reports of Independent Accountants thereon. 20 SIGNATURES BURLINGTON NORTHERN SANTA FE CORPORATION, PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. Burlington Northern Santa Fe Corporation /s/ Robert D. Krebs By: _________________________________ Robert D. Krebs Chairman, President and Chief Executive Officer Dated: March 30, 1998 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF BURLINGTON NORTHERN SANTA FE CORPORATION AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE --------- ----- /s/ Robert D. Krebs Chairman, President and Chief Executive ___________________________________________ Officer (Principal Executive Officer), Robert D. Krebs and Director /s/ Denis E. Springer Senior Vice President and Chief Financial ___________________________________________ Officer (Principal Financial Officer) Denis E. Springer /s/ Thomas N. Hund Vice President and Controller (Principal ___________________________________________ Accounting Officer) Thomas N. Hund /s/ Joseph F. Alibrandi* Director ___________________________________________ Joseph F. Alibrandi /s/ Jack S. Blanton* Director ___________________________________________ Jack S. Blanton /s/ John J. Burns, Jr.* Director ___________________________________________ John J. Burns, Jr. /s/ George Deukmejian* Director ___________________________________________ George Deukmejian /s/ Daniel J. Evans* Director ___________________________________________ Daniel J. Evans /s/ Bill M. Lindig* Director ___________________________________________ Bill M. Lindig /s/ Vilma S. Martinez* Director ___________________________________________ Vilma S. Martinez
S-1
SIGNATURE TITLE --------- ----- /s/ Roy S. Roberts* Director ___________________________________________ Roy S. Roberts /s/ Marc J. Shapiro* Director ___________________________________________ Marc J. Shapiro Director ___________________________________________ Arnold R. Weber /s/ Robert H. West* Director ___________________________________________ Robert H. West /s/ J. Steven Whisler* Director ___________________________________________ J. Steven Whisler /s/ Edward E. Whitacre, Jr. Director ___________________________________________ Edward E. Whitacre, Jr. /s/ Ronald B. Woodard Director ___________________________________________ Ronald B. Woodard /s/ Michael B. Yanney Director ___________________________________________
Michael B. Yanney /s/ Jeffrey R. Moreland *By: ________________________________ Jeffrey R. Moreland Senior Vice President-Law and Chief of Staff Attorney in Fact Dated: March 30, 1998 S-2 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Burlington Northern Santa Fe Corporation and Subsidiaries Our audits of the consolidated financial statements for the years ended December 31, 1997 and 1996 referred to in our report dated February 6, 1998 appearing on page 21 of the 1997 Annual Report to Shareholders of Burlington Northern Santa Fe Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)2. of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein for the years ended December 31, 1997 and 1996 when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP Chicago, Illinois February 6, 1998 F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Burlington Northern Santa Fe Corporation and Subsidiaries We have audited the consolidated financial statements of Burlington Northern Santa Fe Corporation and Subsidiaries for the year ended December 31, 1995, which financial statements are included on pages 22 through 39 of the 1997 Annual Report to Shareholders of Burlington Northern Santa Fe Corporation and incorporated by reference herein. We have also audited the financial statement schedule for the year ended December 31, 1995 listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Burlington Northern Santa Fe Corporation and Subsidiaries for the year ended December 31, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in Note 7 to the consolidated financial statements, the Company changed its method of accounting for periodic major locomotive overhauls in 1995. Coopers & Lybrand, L.L.P. Fort Worth, Texas February 15, 1996, except as to the information presented in Note 8 for which the date is February 6, 1998 F-2 SCHEDULE II BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F -------- ---------- --------- ----------- ------------- ---------- BALANCE AT ADDITIONS ADDITION OF BALANCE AT BEGINNING CHARGED SFP END OF DESCRIPTION OF PERIOD TO INCOME ACCRUAL(1) DEDUCTIONS(2) PERIOD(3) ----------- ---------- --------- ----------- ------------- ---------- December 31, 1997 Casualty and environmental liabilities........... $810 $165 $ - $264 $711 ==== ==== ==== ==== ==== December 31, 1996 Casualty and environmental liabilities........... $916 $188 $ - $294 $810 ==== ==== ==== ==== ==== December 31, 1995 Casualty and environmental liabilities........... $637 $164 $320 $205 $916 ==== ==== ==== ==== ====
- -------- (1) Represents SFP's recorded liability at date of merger of BNI and SFP. (2) Principally represents cash payments. (3)Classified in the consolidated balance sheet as follows:
1997 1996 1995 ---- ---- ---- Casualty and environmental liabilities (current liabilities)............................................. $263 $267 $290 Casualty and environmental liabilities (noncurrent liabilities)............................................. 448 543 626 ---- ---- ---- $711 $810 $916 ==== ==== ====
F-3 BURLINGTON NORTHERN SANTA FE CORPORATION INDEX OF EXHIBITS
XHIBITE NUMBER DESCRIPTION - ------- ----------- 3.1 Amended and Restated Certificate of Incorporation of BNSF (amended as of September 11, 1995). Incorporated by reference to Exhibit 3.1 to BNSF's Report on Form 10-Q for the quarter ended September 30, 1995. 3.2 By-Laws of BNSF (amended as of September 18, 1997). Incorporated by reference to Exhibit 3.1 to BNSF's Report on Form 10-Q for the quarter ended September 30, 1997. 4 BNSF is not filing any instruments evidencing indebtedness because the total amount of securities authorized under any single such instrument does not exceed 10% of BNSF's total assets. BNSF will furnish copies of any material instruments upon request of the Securities and Exchange Commission. 10.1* Burlington Northern Santa Fe Non-Employee Directors' Stock Plan. Incorporated by reference to Appendix A to BNSF's Proxy Statement dated March 5, 1996. Amendment to Burlington Northern Santa Fe Non-Employee Directors' Stock Plan dated January 16, 1997 is incorporated by reference to Exhibit 10.1 to BNSF's Report on Form 10- K for the fiscal year ended December 31, 1996. 10.2* Burlington Northern Santa Fe Corporation 1987 Stock Option Incentive Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-62833). 10.3* Burlington Northern Santa Fe Corporation Incentive Compensation Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-62835). 10.4* Burlington Northern Inc. Senior Executive Survivor Benefit Plan as of April 1, 1986. Incorporated by reference to Amendment No. 1 to BNI's Report on Form 10-K for the fiscal year ended December 31, 1987. 10.5* Burlington Northern Inc. Deferred Compensation Plan as amended effective January 1, 1991. Incorporated by reference to Exhibit 10.5 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.6* Burlington Northern Inc. Performance Share Unit Plan (1981) as of January 1, 1988. Incorporated by reference to Amendment No. 1 to BNI's Report on Form 10-K for the fiscal year ended December 31, 1987. 10.7* Burlington Northern Inc. 1987 Performance Share Unit Plan as of January 1, 1988. Incorporated by reference to Amendment No. 1 to BNI's Report on Form 10-K for the fiscal year ended December 31, 1987. 10.8* Burlington Northern Inc. Supplemental Benefits Plan (as amended and restated effective September 21, 1995). Incorporated by reference to Exhibit 10.8 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.9* 1989 Burlington Northern Inc. Restricted Stock Incentive Plan. Incorporated by reference to BNI's Report on Form 10-K for the fiscal year ended December 31, 1990. 10.10* Burlington Northern Santa Fe Corporation 1990 Directors Stock Option Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-62825). 10.11* Burlington Northern Santa Fe Incentive Bonus Stock Program. Incorporated by reference to Exhibit 10.11 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. Amendment of Burlington Northern Santa Fe Incentive Bonus Stock Program dated January 14, 1998.
- -------- *Management contract or compensatory plan or arrangement. E-1 10.12* Burlington Northern Santa Fe Corporation 1992 Stock Option Incentive Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-62839). 10.13* Burlington Northern Santa Fe 1996 Stock Incentive Plan. Incorporated by reference to Appendix B to BNSF's Proxy Statement dated March 5, 1996. Amendment of Burlington Northern Santa Fe 1996 Stock Incentive Plan dated January 15, 1998. 10.14* Burlington Northern Santa Fe Supplemental Retirement Plan. Incorporated by reference to Exhibit 10.1 to BNSF's Report on Form 10-Q for the quarter ended September 30, 1996. 10.15* Burlington Northern Santa Fe Estate Enhancement Program, as amended and restated effective October 1, 1996. Incorporated by reference to Exhibit 10.15 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.16* Agreement between BNSF and Robert D. Krebs dated as of January 30, 1997. Incorporated by reference to Exhibit 10.16 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.17* Form of BNSF Change-in-Control Agreement (applicable to Messrs. Babb, Moreland, Schultz, Springer, and Hund). Incorporated by reference to Exhibit 10.17 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.18* Employment Agreement by and between Burlington Northern Inc. and Gregory T. Swienton. Incorporated by reference to Exhibit 10.23 to BNI's Report on Form 10-K for the fiscal year ended December 31, 1994. 10.19* Burlington Northern Santa Fe Deferred Compensation Plan for Directors as amended January 16, 1997. Incorporated by reference to Exhibit 10.19 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.20* Burlington Northern Inc. Nonqualified 401(k) Restoration Plan. Incorporated by reference to Exhibit 10.20 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.21* Burlington Northern Inc. Form of Severance Agreement and amendments through September 18, 1995 (applicable to Messrs. Rose and Swienton as of March 13, 1998). Incorporated by reference to Exhibit 10.21 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. Amendment to Form of Severance Agreement dated December 3, 1997. 10.22* Burlington Northern Inc. Director's Charitable Award Program. Incorporated by reference to Exhibit 10.22 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.23* Burlington Northern Santa Fe Salary Exchange Option Program. Incorporated by reference to Exhibit 10.23 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. Amendment to Burlington Northern Santa Fe Salary Exchange Option Program dated January 15, 1997 is incorporated by reference to Exhibit 10.23 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.24* Santa Fe Pacific Corporation Supplemental Retirement Plan ("Supplemental Plan"). Incorporated by reference to Exhibit 10(d) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1984. Supplemental Plan as amended October 1, 1989, and Amendment to Supplemental Plan dated February 27, 1990, are incorporated by reference to Exhibit 10(d) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1989. Amendment to Supplemental Plan dated March 22, 1994, and effective January 1, 1994, is incorporated by reference to Exhibit 10.24 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.25* SFP Incentive Stock Compensation Plan. Incorporated by reference to Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1985. Amendments to SFP Incentive Stock Compensation Plan dated May 28, 1987 and October 29, 1987 are incorporated by reference to Exhibit
- -------- *Management contract or compensatory plan or arrangement. E-2 10(e) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1987. Amendments to SFP Incentive Stock Compensation Plan dated March 8, 1989, June 8, 1989, and February 27, 1990 are incorporated by reference to Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1989. Amendment to SFP Incentive Stock Compensation Plan effective as of July 24, 1990 is incorporated by reference to SFP's Report on Form 10-Q for the quarter ended June 30, 1990. Amendment to SFP Incentive Stock Compensation Plan dated December 4, 1990, is incorporated by reference to Exhibit 10(e) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1990. 10.26* SFP Form of Severance Agreement dated November 2, 1987 (applicable to Mr. Springer as of March 13, 1998), as adopted in May 1987 and amended in October 1987. Incorporated by reference to Exhibit 10(j) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1987. Amendment to Form of Severance Agreement dated July 24, 1990 is incorporated by reference to SFP's Report on Form 10-Q for the quarter ended June 30, 1990. Amendment to Form of Severance Agreement adopted January 25, 1994 is incorporated by reference to Exhibit 10.1 to SFP's Report on Form 10-Q for the quarter ended June 30, 1994. Amendment to Form of Severance Agreement dated March 28, 1995 is incorporated by reference to Exhibit 10.5 to SFP's Report on Form 10-K for the fiscal year ended December 31, 1994. Amendment to Form of Severance Agreement dated December 3, 1997. Amendment to Form of Severance Agreement dated February 6, 1998 (Mr. Hund). 10.27* Burlington Northern Santa Fe Directors' Retirement Plan. Incorporated by reference to Exhibit 10.29 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.28* Benefits Protection Trust Agreement dated as of January 22, 1996 by and between BNSF and Bankers Trust Company. Incorporated by reference to Exhibit 10.28 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1996. 10.29* Retirement Benefit Agreement dated February 26, 1992 between SFP and R. D. Krebs. Incorporated by reference to Exhibit 10(l) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1991. 10.30* Amended and Restated Trust Agreement dated as of April 1, 1994 by and between SFP and The Bank of New York. Incorporated by reference to Exhibit 10.32 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.31* Trust Agreement dated as of July 26, 1994 by and between SFP and The Bank of New York. Incorporated by reference to Exhibit 10.33 to BNSF's Report on Form 10-K for the fiscal year ended December 31, 1995. 10.32* The Atchison, Topeka and Santa Fe Railway Company Incentive Compensation Plan. Incorporated by reference to Exhibit 10(n) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1991. 10.33* Burlington Northern Santa Fe Long Term Incentive Stock Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-63247). 10.34* Santa Fe Pacific Corporation Supplemental Retirement and Savings Plan. Incorporated by reference to Exhibit 10(s) to SFP's Report on Form 10-K for the fiscal year ended December 31, 1993. 10.35* Burlington Northern Santa Fe Incentive Stock Compensation Plan. Incorporated by reference to BNSF's Registration Statement on Form S-8 (File No. 33-63253). 10.36* The Burlington Northern and Santa Fe Railway Company Severance Plan. 10.37* Burlington Northern Santa Fe Corporation Senior Management Stock Deferral Plan. 12 Computation of Ratio of Earnings to Fixed Charges. Incorporated by reference to Exhibit 12 to BNSF's Registration Statement on Form S-3 (File No. 333-48227). 13 1997 Annual Report to Shareholders of BNSF (Consolidated Financial Highlights on page 1, and pages 13-39, only.)
- -------- *Management contract or compensatory plan or arrangement. E-3 21 Subsidiaries of BNSF. 23.1 Consent of Price Waterhouse LLP. 23.2 Consent of Coopers & Lybrand L.L.P. 24 Powers of Attorney 27 Financial Data Schedule.
- -------- *Management contract or compensatory plan or arrangement. E-4 EX-10.11 2 BNSF INCENTIVE BONUS STOCK PROGRAM EXHIBIT 10.11 BURLINGTON NORTHERN SANTA FE CORPORATION COMPENSATION COMMITTEE January 14, 1998 AMENDMENT TO BURLINGTON NORTHERN SANTA FE BONUS STOCK PROGRAM WHEREAS, the Compensation Committee wishes to encourage the identity of shareholder interests with employee interests through stock ownership under the Burlington Northern Santa Fe Incentive Bonus Stock Program ("Program") Exchange Procedures; WHEREAS, it is deemed appropriate to amend the Program from time to time; RESOLVED, that effective immediately and in respect to outstanding awards, paragraph 10 of the Burlington Northern Santa Fe Incentive Bonus Stock Program Exchange Procedures be deleted and the following paragraph inserted in its stead: In the event that a participant with an Exchange Grant is involuntarily terminated by the Company other than for Cause, the Committee agrees to permit a participant to elect to receive (i) a proration of the outstanding award as set forth in the Plan or (ii) to surrender the Exchange Grant in exchange for the amount of the cash award previously foregone and the award of Restricted Stock will terminate as if never granted. In the event of retirement as defined in the Burlington Northern Santa Fe Retirement Plan, the Committee agrees to permit a participant to receive a proration of the outstanding award as set forth in Plan. Notwithstanding the foregoing, the Committee reserves the right to withdraw its consent to permit participants who terminate due to retirement from electing the benefits of this subparagraph. FURTHER RESOLVED, that each of the Secretary and other officers of the Company are authorized and empowered by and on behalf and in the name of the Company to do and perform, or cause to be done and performed, all such acts, deeds and things and to make, execute, and deliver, or cause to be made, executed, and delivered, all such agreements, undertakings, documents, instruments, or certificates, as each such officer may deem necessary or appropriate to effectuate or carry out fully the purpose and intent of the foregoing resolutions. Fort Worth, Texas January 14, 1998 EX-10.13 3 BNSF 1996 STOCK INCENTIVE EXHIBIT 10.13 BURLINGTON NORTHERN SANTA FE CORPORATION COMPENSATION COMMITTEE January 14, 1998 AMENDMENT TO THE BURLINGTON NORTHERN SANTA FE 1996 STOCK INCENTIVE PLAN WHEREAS, Burlington Northern Santa Fe Corporation ("Company") maintains the Burlington Northern Santa Fe 1996 Stock Incentive Plan ("Plan"); WHEREAS, amendment of the Plan is now desirable; NOW, THEREFORE, effective upon the date of the adoption of this amendment, the Plan is amended as set forth below: 1. Section 13.1 of the Plan shall be amended by inserting the words "early retirement under the terms of a Qualified Retirement Plan of an Employer," after the word "Disability" where it appears therein. 2. Section 13.3 of the Plan shall be amended by inserting the words "early retirement under the terms of a Qualified Retirement Plan of an Employer," after the word "Disability" where it appears therein. 3. Section 13.5 of the Plan shall be amended by inserting the words "early retirement under the terms of a Qualified Retirement Plan of an Employer," after the word "Disability" where it first appears therein and at the end of the first sentence of Section 13.5. 4. Section 13.5 of the Plan shall be amended by deleting the second sentence therein and inserting the following: Incentive Stock Options which are or become exercisable by reason of death, Disability, early retirement under the terms of a Qualified Retirement Plan of an Employer, or Retirement shall expire on the expiration date set forth in the award or, if earlier: (a) three years after the Date of Termination, if the Participant's termination occurs because of death or Disability; and (b) three months after the Date of Termination, if the Participant is terminated by the Participant's employer for reasons other than Cause, early retirement under the terms of a Qualified Retirement Plan of an Employer, or Retirement. EX-10.21 4 BNSF FORM OF SEVERENCE AGREEMENT EXHIBIT 10.21 Date: December 3, 1997 To: CIC Person in Schaumburg (BN) From: Ricci Gardner Subject: Change in Control Burlington Northern Santa Fe Corporation (the "Company") is willing to offer you the opportunity to extend the date by which you may receive benefits as described in your Burlington Northern Letter Agreement dated February 9, 1990, as amended, between you and Burlington Northern, Inc. ("Letter Agreement"), and which was assumed by the Company on September 22, 1995. Notwithstanding any provision of the Burlington Northern Santa Fe Employee Retention Agreements adopted January 16, 1997 to the contrary, and in consideration of your continued employment, the Company is agreeable to extending the date so that benefits of the Letter Agreement would be available to you to the earlier of June 30, 2001, or the date upon which your position is relocated to Fort Worth, Texas; provided however, the benefits set forth in Section 5 (iii) (b) of the Letter Agreement shall not exceed two (2) times your Base Compensation in effect as of the Date of Termination. During this period, the benefits of the Letter Agreement would be available if you satisfy the conditions of a termination for Good Reason under the Letter Agreement (other than Good Reason relating to the relocation of the Company's headquarters to Fort Worth, Texas), if you are relocated to Fort Worth or by the Company's termination of your employment for reasons other than for cause. This supplement to your Letter Agreement will expire the earlier of June 30, 2001, or upon the relocation of your position to Fort Worth, Texas. By signing below, you are accepting the terms and conditions of this supplement to your Letter Agreement, which extends the date of any right to receive benefits you may have until June 30, 2001, or until relocation of your position to Fort Worth, Texas. - ---------------------------- ---------------------------- Signature Date - ---------------------------- ---------------------------- Print Name Social Security Number EX-10.26 5 SFP FORM OF SEVERENCE AGREEMENT EXHIBIT 10.26 Ricci L. Gardner Vice President, Human Resources December 3, 1997 Mr. Thomas N. Hund 6 Windsor Court South Barrington, Illinois 60010 Dear Mr. Hund: Burlington Northern Santa Fe Corporation (the "Company") is willing to offer you the opportunity to receive the benefits as described in your Santa Fe Pacific Letter Agreement (change in control) dated June 20, 1994, as amended, between you and Santa Fe Pacific Corporation, and which was assumed by the Company on September 22, 1995. As you know, the opportunity for you to receive the benefits of your Agreement expires February 6, 1998. Notwithstanding any provision of the Burlington Northern Santa Fe Employee Retention Agreements adopted January 16, 1997 to the contrary, in consideration of your continued employment, the Company is agreeable to providing you with the benefits of the Agreement including the provision of the benefits of Section 4(iii)(b)(1) on an after-tax basis subject to the limitations of the Agreement if you are not appointed to the position of Senior Vice President and Chief Financial Officer by December 31, 1999 or if a person other than yourself is appointed to this position by such time and you give Notice of Termination as provided for in the Agreement. This Letter Agreement will expire on January 3, 2000. By signing below, you are accepting the terms and conditions of this Letter Agreement. Sincerely, Ricci L. Gardner Vice President - Human Resources Agreed: /s/ THOMAS N. HUND Signature February 6, 1998 EXHIBIT 10.26 Date: December 3, 1997 To: CIC Person in Schaumburg (SF) From: Ricci Gardner Subject: Change in Control Burlington Northern Santa Fe Corporation (the "Company") is willing to offer you the opportunity to extend the date by which you may receive benefits as described in your Santa Fe Pacific Letter Agreement dated June 20, 1994, as amended, between you and Santa Fe Pacific Corporation ("Letter Agreement"), and which was assumed by the Company on September 22, 1995. As you know, the opportunity for you to receive the benefits of your Letter Agreement expires February 6, 1998. Notwithstanding any provision of the Burlington Northern Santa Fe Employee Retention Agreements adopted January 16, 1997 to the contrary, in consideration of your continued employment, the Company is agreeable to extending the date so that benefits of the Letter Agreement would be available to you (as set forth in Section 1 of the Letter Agreement) to the earlier of June 30, 2001, or the date upon which your position is relocated to Fort Worth, Texas. During this period, the benefits of the Letter Agreement would be available if you satisfy the conditions of a termination for Good Reason under the Letter Agreement (other than Good Reason relating to the relocation of the Company's headquarters to Fort Worth, Texas), if you are relocated to Fort Worth or by the Company's termination of your employment for reasons other than for cause. This supplement to your Letter Agreement will expire the earlier of June 30, 2001, or upon the relocation of your position to Fort Worth, Texas. By signing below, you are accepting the terms and conditions of this supplement to your Letter Agreement, which extends the date of any right to receive benefits you may have until June 30, 2001, or until relocation of your position to Fort Worth, Texas. - ------------------------------------ ------------------------------------ Signature Date - ------------------------------------ ------------------------------------ Print Name Security Number EX-10.36 6 SEVERENCE PLAN EXHIBIT 10.36 Effective January 1, 1998 THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY SEVERANCE PLAN PURPOSE OF THE PLAN - ------------------- The Burlington Northern and Santa Fe Railway Company Severance Plan ("Plan") is intended to provide separation pay to salaried, exempt employees of The Burlington Northern and Santa Fe Railway Company ("Company") whose employment is terminated by the Company under the circumstances outlined in this Plan. With the adoption of this Plan, the Company has also terminated all prior severance arrangements adopted by predecessor companies except to the extent that an individual is eligible to receive benefits under such program. ELIGIBILITY - ----------- A person shall be an "Eligible Employee" if he or she is an active, regularly assigned, full-time salaried employee not covered by a collective bargaining agreement, who is terminated by the Company for other than Cause, and who executes a general release agreement in the form as established by the Company or the Committee under this Plan; provided, however, an employee who is party to an individual severance agreement with the Company or its affiliates and under which benefits are paid upon termination shall not constitute an Eligible Employee. Notwithstanding the foregoing, an employee who does not execute a general release and who otherwise satisfies the requirements of an Eligible Employee shall be entitled to two weeks' Base Salary as severance, but no other benefits under this Plan. On an exception basis, the Company may, in its sole discretion, offer the benefit of this Plan on an individual basis as an inducement to a mutually- agreed termination of employment. DEFINITIONS - ----------- 1. "Credited Service" shall be defined as months of vesting service for which each employee is credited under the BNSF Retirement Plan. A partial month of service shall be credited as a full month. 2. "Base Salary" means the Eligible Employee's highest regular base salary during the 24 month period prior to the date of termination of employment, excluding overtime and bonuses, computed on a weekly basis. 3. "Committee" means a committee comprised of the Senior Vice President Law and Chief of Staff and Vice President- Human Resources. The Committee shall have discretionary authority to administer, to construe and interpret the Plan, to decide all questions of eligibility, to determine the amount, manner and time of payment of any benefits hereunder, and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Company or the President of the Company reserves the right to amend or terminate all or any portion of the Plan at any time. 4. "Company" means The Burlington Northern and Santa Fe Railway Company, and its wholly owned subsidiaries which elect to participate. 5. "Severance Allowance" means the total Severance Allowance available to an Eligible Employee pursuant to the Plan. 6. "BNSF Retirement Plan" means the qualified retirement plan maintained by the Company. 7. "Incentive Payments" means gross cash payments earned under the Incentive Compensation Plan (ICP). 8. "Vacation" means the vacation amount as provided under the Company's existing vacation policy. In the event an Eligible Employee has a written agreement providing additional vacation benefits, that agreement will govern. 9. "Cause" shall mean (a) the failure by the employee to substantially perform the assigned duties with the Company in accordance with the standards of the Company (other than any such failure resulting from incapacity due to physical or mental illness), or (b) the willful engaging by the employee in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, shall be deemed "willful" unless done, or omitted to be done, by the employee not in good faith and without reasonable belief that such action or omission was in the best interest of the Company. DURATION AND TIMETABLE - ---------------------- 1. This Plan shall continue in effect through December 31, 1998; provided, however, that commencing on January 1, 1999, and each January 1 thereafter, the Plan shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Board of Directors determines that the Plan shall not be so extended. 2. The Company will determine the date an Eligible Employee's termination will be effective. In the event an Eligible Employee resigns or otherwise terminates employment with the Company prior to the effective Date of Termination, he/she forfeits all further participation in this Plan. 3. The adoption of this Plan is entirely voluntary on the part of the Company and is not intended nor shall be construed as creating a contract of employment between the Company or its successors and an Eligible Employee, nor be construed as a term of employment. SEVERANCE ALLOWANCE - ------------------- The Plan will provide an Eligible Employee a specified amount of money based upon your Base Salary (excluding Incentive Payments) at the time of separation and certain other benefits. The amount of the Severance Allowance will be determined under one of the following schedules: A lump sum allowance in an amount equal to the higher of (1) or (2) 1. One week base salary times years of Credited Service, plus One week base salary per $4,000 of annual base salary, plus One week base salary for each year over 40 years of age. 2. Two weeks' Base Salary times the years of Credited Service. The minimum payment under this schedule will be eight (8) weeks' Base Salary and the maximum benefit will be two (2) years' Base Salary. 2 In respect to Eligible Employees who are covered by Northern Lines merger protection and who terminate prior to July 1, 1998, the amount of the severance allowance shall be no less than two times annual Base Salary. The time and method of payment of a Severance Allowance will be determined by the Company, but it is intended that payments will be made within 30 days of receipt of the general release by Human Resources. Severance Allowance payments will be subject to withholdings for Federal Income Tax, State Income Tax where applicable, and Railroad Retirement Tax and other appropriate deductions, but shall not constitute compensation under any Company retirement plan. Notwithstanding the foregoing provisions of this Plan, the amount of any payment provided under this Plan shall be reduced by any similar payment made by the Company required by any federal or state law including but not limited to the Worker Adjustment and Retraining Notification Act with respect to such termination of employment. In addition, notwithstanding the foregoing provisions of the Plan, no payments will be made to an Eligible Employee or his or her spouse or beneficiary, if a pension commences to be paid to the Eligible Employee, spouse or beneficiary pursuant to Supplement A of the BNSF Retirement Plan. UNPAID LEAVE OF ABSENCE - ----------------------- Eligible Employees who are eligible to retire under the early retirement provisions of the BNSF Retirement Plan as of their date of termination may elect to be placed upon an Unpaid Leave of Absence until the earlier of the date the Eligible Employee elects to begin receiving benefits under the BNSF Retirement Plan, reaches age 65 or reaches 30 years of service at or after age 62; or Eligible Employees whose age and Credited Service when added together total 70, or who are 50 years of age with five (5) years of Credited Service and who are not eligible under paragraph 1 above, may elect to be placed upon an Unpaid Leave of Absence until eligible to commence an early retirement benefit under the BNSF Retirement Plan. An Eligible Employee may irrevocably elect to spread his or her Severance Allowance for a period of up to two years from the date of termination provided such election is made prior to termination and in accordance with such restrictions as the Committee may impose. In the event the Eligible Employee terminates his employment, any remaining amounts due shall be paid in a lump sum. An Eligible Employee who elects to be placed upon Unpaid Leave of Absence will continue to accrue benefit and vesting service under the BNSF Retirement Plan to the extent consistent with applicable IRS requirements. If the Employee elects the Unpaid Leave of Absence, there are other special rules applicable as described below. BENEFITS - -------- All welfare benefits and participation in compensation plans shall cease upon your date of termination or the date your unpaid leave commences except as described below. HEALTH CARE BENEFITS -------------------- The Company will pay the premiums for continuation coverage under the medical and dental plan pursuant to the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for six (6) months and the Eligible Employee may purchase up to an additional twelve (12) months COBRA coverage or the number of months required by law; provided coverage will terminate when an individual is covered under another group medical and dental plan. If an Eligible Employee elects to be placed on an Unpaid Leave of Absence, the Eligible Employee will at the end of the six (6) month period, be eligible to elect to commence COBRA coverage or retiree medical coverage under the retiree 3 medical plan for which the Eligible Employee would have become eligible. If you do not elect retiree medical at the end of your six month (or 18 month period), you will be eligible to elect retiree medical on your retirement date at the conclusion of your Unpaid Leave of Absence. If an Eligible Employee does not qualify for group life insurance as a retiree under the BNSF Group Life Insurance Plan, a conversion privilege for employee life insurance will be provided within 31 days of the date coverage ceases. INVESTMENT AND RETIREMENT PLAN ------------------------------ Eligible Employees may elect to keep their accounts in the Investment and Retirement Plan or to receive account balance upon termination, however Eligible Employees on an Unpaid Leave of Absence will not be eligible for a distribution until the termination of the Unpaid Leave of Absence and loan payments will be required to be made while on leave. If the Eligible Employee leaves his/her account in the plan until January 31 of the year following termination, an additional Company match may be available consistent with the terms of the Investment and Retirement Plan in effect at such time. STOCK PLANS ----------- If the Eligible Employee is terminated under this Plan, stock awards will become exercisable or restrictions shall lapse in an amount and for the limited period of time set forth in the applicable stock plan. Under the BNSF 1996 Stock Incentive Plan, stock awards will be prorated based upon your termination date and stock options shall be exercisable for three months as described in the plan. If the Eligible Employee elects the Unpaid Leave of Absence, the right to an Unpaid Leave of Absence is contingent upon the Eligible Employee's agreement that stock options and non-performance based restricted stock will be treated as if the Eligible Employee had terminated, i.e., stock options will not continue to vest, will be prorated, and will be exercisable for a limited period of time as if the Eligible Employee had terminated on the date leave commenced and restricted stock will vest on a prorated basis. INCENTIVE PAYMENTS ------------------ An Eligible Employee shall be entitled to a pro rata ICP payment based upon the date of termination or the day the Unpaid Leave of Absence commences and based upon Company performance. The ICP payment will be made at the same time active employees receive their payments. VACATION -------- Accrued and earned vacation will be paid in a lump sum following the date of termination or the date the Unpaid Leave of Absence commences. OUTPLACEMENT COUNSELING ----------------------- The Company may provide at times and places specified outplacement counseling as designated by the Company to Eligible Employees. The Company will have sole discretion in selection of the outside vendor and services to be provided. CLAIM REVIEW PROCEDURE - ---------------------- 1. All inquiries concerning claims under the Plan shall be submitted to the Company and shall be addressed as 4 follows: Mr. Ricci Gardner, Vice President-Human Resources, BNSF, 2650 Lou Menk Drive, Ft. Worth, Texas, 76131. In the event that any claim for benefits is denied in whole or in part, the Company shall notify the claimant in writing of such denial and shall advise the claimant of his or her right to a review thereof. Such written notice shall set forth, in a manner calculated to be understood by the claimant, specific reasons for such denial, specific references to the Plan provisions on which such denial is based, a description of any information or material necessary for the claimant to perfect the claim, an explanation of why such material is necessary and an explanation of the Plan's review procedure. Such written notice shall be given to the claimant within a reasonable period of time after the claim is filed with the Company. 2. Any person or his or her duly authorized representative, whose claim for benefits is denied in whole or in part may appeal from such denial by submitting to the Company a request for a review of the claim within 65 days after receiving written notice of such denial from the Company. The Company shall give the claimant an opportunity to review pertinent documents in preparing his or her request for review. 3. The request for review must be in writing and shall be addressed as follows: Mr. Ricci Gardner, Vice President-Human Resources, BNSF, 2650 Lou Menk Dr., Fort Worth, Texas 76131. The request for review shall set forth all of the grounds upon which it is based, all facts and support thereof and any other matters which the claimant deems pertinent. The Company may require the claimant to submit such additional facts, documents or other material as the Company may deem necessary or appropriate in making its review. 4. The Company shall act upon each request for review within 60 days after receipt thereof unless special circumstances require further time for processing, but in no event shall the decision on review be rendered more than 120 days after the Company receives the request for review. 5. The Company shall give written notice of its decision to the claimant. In the event that the Company confirms the denial of application for benefits in whole or in part, such notice shall set forth, in a manner calculated to be understood by the claimant, the specific reasons for such denial and specific references to the Plan provisions on which the decision is based. ERISA REQUIREMENTS - ------------------ The following paragraphs contain specific information required by the Employee Retirement Income Security Act of 1974 (ERISA): The name of the Plan is The Burlington Northern and Santa Fe Railway Company Severance Plan. The Sponsor of the Plan is: The Burlington Northern and Santa Fe Railway Company 2650 Lou Menk Drive Fort Worth, Texas 76131 The administrator of the plan is the Committee. The Committee can be contacted by writing: The BNSF Severance Plan Committee c/o Ricci Gardner 2650 Lou Menk Drive 5 Fort Worth, Texas 76131 The Plan Administrator may be contacted by calling (817) 352-6009. Mr. Jeffrey Moreland, Senior Vice President-Law and Chief of Staff, The Burlington Northern and Santa Fe Railway Company, 1700 East Golf Road, Schaumburg, Illinois 60173, is designated as agent for legal process. Service of legal process may also be made upon written request to the Plan Administrator. The Employer Identification Number (EIN) assigned by the Internal Revenue Service is 41-6034000. You are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all plan participants shall be entitled to: examine, without charge at the office of the Plan Administrator, all plan documents and copies of all documents filed by the plan with the U.S. Department of Labor, such as detailed annual reports and plan descriptions. obtain copies of all plan documents and other plan information upon written request to the Plan Administrator. A reasonable charge may be made for the copies. receive a summary of the plan's annual report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report. In addition to creating rights for plan participants, ERISA imposes duties upon people who are responsible for the operation of the plan. The people who operate your plan, called "fiduciaries" of the plan, have the duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have a right to have the plan reviewed and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that plan fiduciaries misuse the plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U. S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees; for example, if it finds your claim is frivolous. If you have any questions about this statement or your rights under ERISA, you should contact the Plan Administrator or the Area Office of the U.S. Labor- Management Service Administration, Department of Labor. DISCLAIMER - ---------- This plan is set forth in this summary plan description is not a condition of employment nor is it intended to be and does not constitute a contract of employment and all participants are employees at the will of the Company. 6 EX-10.37 7 STOCK DEFERRAL PLAN EXHIBIT 10.37 Burlington Northern Santa Fe Corporation Senior Management Stock Deferral Plan ------------------------------------- The following sets forth the rules that apply to the Burlington Northern Santa Fe Corporation Senior Management Stock Deferral Plan (the "Plan"): 1. Purpose. The purpose of the Plan is to permit eligible employees of Burlington Northern Santa Fe Corporation and its principal subsidiary, The Burlington Northern and Santa Fe Railway Company (collectively, the "Company") to defer delivery of common stock ("Stock") of Burlington Northern Santa Fe Corporation otherwise distributable to Eligible Employees (as defined below), and thereby to allow the employees to defer a portion of their Stock income on a pre-tax basis. The "Effective Date" of the Plan is December 1, 1996. The "Plan Year" is the calendar year. 2. Eligible Employees. Participation in the Plan shall be limited to "Eligible Employees." The determination of the persons selected as "Eligible Employees" shall be made by the Committee (as described below), and shall be limited to a select group of management or highly compensated employees. Beginning as of the Effective Date (as described below), and until revised by the Committee, the "Eligible Employees" shall consist of each of those Senior Management employees of the Company who: (i) is at salary band 34 or higher; and (ii) has a total base salary plus target bonus of at least $100,000. An Eligible Employee who defers the delivery of Stock in accordance with the Plan shall thereby become a "Participant" in the Plan. 3. Deferral Election. An employee may elect to defer the delivery of Stock otherwise distributable to him or her under the Burlington Northern Santa Fe 1996 Stock Incentive Plan and any other stock-based compensation plan of the Company, as well as any other predecessor plans and successor plans (the "Stock Plans") pursuant to (a) stock options ("Options"); and (b) restricted stock, including matching stock with respect to such restricted stock (collectively, "Restricted Stock"). Such deferral shall be made by filing a "Deferral Election" with the Company in accordance with the Plan, subject to the following: (a) A Deferral Election shall be effective only if the employee satisfies the requirements for an Eligible Employee at the time the Stock would have been delivered in the absence of the Deferral Election. (b) A Participant's Deferral Election with respect to Restricted Stock or Options shall identify the shares to be covered by the election, and may apply to all or any portion of the shares of such stock, provided that if the Participant elects deferral of an award of Restricted Stock or Options worth $20,000 or less, the entire stock award shall be subject to the Deferral Election. The election with respect to Restricted Stock must be made prior to the date of grant of the Restricted Stock (or such earlier date established by the Committee), and will be irrevocable. (c) A Participant's Deferral Election with respect to Options shall identify the Options that are covered by the election, and may apply to any non- qualified stock option that is outstanding on the date the Deferral Election is made; provided that any Deferral Election shall apply to all (but not less than all) of the shares subject to any outstanding non- qualified stock options granted to the Participant on any grant date. The same deferral period shall apply to all Options granted to a Participant on a single grant date, but, subject to the Plan, the Participant may elect different deferral periods for Options granted on different grant dates. A Deferral Election may be made with respect to the delivery of Option stock by an Eligible Employee at any time the employee holds Options, except that no election may be made after the Participant's employment has terminated. The Deferral Election with respect to any Option will be irrevocable. (d) The Deferral Election with respect to any shares of Stock shall specify the method of distribution of those shares at the end of the deferral period, as elected by the Participant and subject to the terms of the Plan. (e) A Deferral Election will be deemed to be filed with the Company on the date it is received by the Director of Compensation. 4. Special Rules for Exercise of Options. The exercise of an Option subject to a Deferral Election shall be subject to the following: (a) The Deferral Election for any Option shall be effective for Option exercises occurring on or after the six-month anniversary of the date of such election. The Deferral Election shall remain in effect for the period specified in such election but shall not be less than one year. The Deferral Election shall expire upon the earlier of the date set forth in such election or the Option expiration date. (b) After the Deferral Election is filed for any Option but before it becomes effective, the Option shall not be exercisable; provided, however, that the Deferral Election shall be cancelled, and the Option shall become exercisable -2- (to the extent that it would have otherwise have been exercisable in the absence of the Deferral Election) upon the occurrence, prior to the date the election has become effective, of either a Change in Control or the Participant's termination of employment. (c) Subject to the Plan, Options providing for deferred delivery of Option stock may be exercised by delivery to the Secretary of the Company of a notice of exercise specifying the number of shares to be purchased, and accompanied by shares of Stock then owned by the Participant having value sufficient to satisfy the exercise price (or, if permitted by the Company, by submitting a signed statement to the Director of Compensation that the Participant then owns sufficient shares). The Company shall require evidence or attestation that the shares have been continuously owned by the Participant for not less than six months prior to the exercise. For purposes of the foregoing requirement as to continuous ownership of shares, (i) shares subject to deferred delivery are not deemed owned until delivery occurs, and (ii) continuous ownership of the shares shall be deemed interrupted by delivery for a prior option exercise (so that the same shares may not be used to satisfy the purchase price of an Option more than once in any six-month period). Shares which are delivered by the Participant to satisfy the exercise price shall be returned to the Participant as soon as practicable after delivery and exercise. 5. Withholding. Any tax withholding due at the time of crediting of Share Units to a Participant's Account, or at the time of vesting of such Share Units, shall be payable by the Participant by check to the Company. The Participant may elect to have the withholding obligation which arises upon distribution of the Deferral Account satisfied by the Stock credited to the Participant's Deferred Account (or that would otherwise be credited to that account) sufficient to satisfy the withholding obligation. 6. Deferred Accounts. The Company shall establish a Deferred Account (or more than one Deferred Account, as described below) for each Participant. A separate Deferred Account shall be established for each separate Restricted Stock award that is subject to deferral, and for each exercise of an Option award that is subject to deferral. Each Deferred Account for a Participant shall be subject to the following adjustments: (a) For each Restricted Stock award subject to deferral, the Participant's Deferred Account established for that award will be credited with the number of Share Units equal to the number of shares of Stock that the Participant would have received in the absence of the deferral, with such crediting occurring as of the date the shares would have been distributed in the absence of the deferral. -3- (b) For each Option award subject to deferral, the Participant's Deferred Account established for that award will be credited with the number of Share Units equal to the net additional number of shares of Stock resulting from the Option exercise that the Participant would have received in the absence of the deferral, with such crediting occurring as of the date the shares would have been distributed in the absence of the deferral. (c) As of the date of any distribution of shares of Stock with respect to a Participant's Deferred Account under the Plan, the Share Units credited to a Participant's Deferred Account shall be reduced by the number of Shares distributed to the Participant. (d) The number of Share Units to be credited to a Participant's Deferred Account in accordance with paragraphs (a) and (b), and the number of Share Units in the Deferred Account balance as of any date, shall be equitably adjusted by the Company for any change in the outstanding shares of common stock of the Company by reason of any stock dividend, split, spinoff, recapitalization or other similar change, to the same extent such adjustments would be made under the applicable Stock Plan with respect to shares of Stock, as necessary to preserve the benefit of the Plan for the Participant and the Company. 7. Dividends. As of each dividend record date for Stock occurring on or after the date any Share Units are credited to a Deferred Account of a Participant, and prior to the date of distribution of shares of Stock with respect to those Share Units (or, if applicable, the date of forfeiture of the Share Units), the Participant shall receive a cash payment equal to the amount of the dividend that would be payable with respect to the number of shares of Stock equal to the number of Share Units credited to the Participant's Deferred Account on the dividend record date, with such payment made on the date of payment of the applicable dividend. 8. Vesting in Share Units. The vesting provisions that would have been applicable to the shares of Stock in the absence of a Deferral Election shall apply to Share Units credited to the Participant's Deferred Account as though each Share Unit represented one share of Stock; provided that dividends shall be fully vested, to the extent that such dividends are payable with respect to Stock for record dates occurring on or after the date the Share Units are credited to the Participant's Deferred Account and prior to any forfeiture of Share Units, and would have been vested if the Stock were not subject to a Deferral Election. 9. Distribution of Account. The Participant shall receive a distribution of shares of Stock equal to the number of Share Units credited to each of his or her -4- Deferred Accounts (excluding Share Units that are not vested), in accordance with the terms of the applicable Deferral Election and subject to the terms of the Plan. Such shares may consist, either in whole or in part, of the Company's authorized and unissued Stock or shares of the Company's authorized and issued Stock reacquired by the Company and held in its treasury. 10. Distribution Elections. Subject to the provisions of the Plan, distributions with respect to a Participant's Deferred Accounts shall be made in accordance with the election of the Participant. Except as otherwise provided in the Plan, the Participant may make a different distribution election with respect to each Deferred Account. 11. Distributions While Employed. A Participant's Deferral Election for any Deferred Account may provide that all of a Deferred Account balance will be paid while the Participant is employed by the Company or its subsidiaries; provided, however, that the distribution during employment must be not less than three years from the date on which the Deferral Account is established. Distributions made to a Participant while employed will be made in a lump sum. 12. Distributions after Termination. Distributions with respect to a Participant's Deferred Account following the Participant's termination of employment shall be subject to the following: (a) Retirement. A Participant's Deferral Election for any Deferred Account may provide that the Deferred Account balance will be paid after the Participant's Retirement, in a lump sum, or in annual payments over a period of from two (2) to fifteen (15) years. If distributions are made under this paragraph (a), all of the Participant's Deferred Accounts shall be made in the same manner. Distributions following Retirement will be made or commence not later than 60 days after the Participant's date of Retirement. A Participant will be considered to have terminated employment by reason of "Retirement" if the Participant's termination of employment occurs at the earlier of: (i) after the Participant has attained age 55 and completed at least ten (10) years of service; or (ii) after the Participant has attained age 65. (b) Termination before Retirement. A Participant's Deferred Account balances will be paid after the Participant's termination of employment for reasons other than Retirement or death in a lump sum. However, if the Participant's employment is terminated by his or her employer for reasons other than cause, the benefits may be distributed in one, two or three annual installments, but only if the Participant has elected this form of payment at least one year prior to termination of employment. Payments under this paragraph (b) shall be made -5- or commence within 60 days following the Participant's termination of employment. (c) Death. A Participant's Deferred Account balances will be paid after the Participant's termination of employment by reason of death in a lump sum. (d) Beneficiary. If a Participant dies after termination of employment, but prior to receiving all of his or her benefits under the Plan, the Participant's beneficiary will continue to receive the benefits at the time they would have been distributed to the Participant if the Participant had survived. 13. Changes to Distribution Elections. A Participant may revise his or her election with respect to distribution of any Deferred Account in accordance with the following: (a) Subject to paragraphs (b) and (c) below, the Participant may revise the election to provide for a later distribution date, but only if all of the following requirements are satisfied: (i) the election is filed with the Company at least one year prior to the date that such distribution would otherwise commence under the original election for that Deferred Account; (ii) the Participant has not previously revised the election for that Deferred Account to delay the distribution date; and (iii) the revised distribution date is not later than a date that would have been permitted if the date were selected as part of the initial Deferral Election. (b) The Participant may revise the election to provide for a different form of distribution following the Participant's date of Retirement, but only if the election is filed with the Company at least three years prior to the Participant's date of Retirement. (c) The Participant may revise the election to provide for a different form of distribution following the Participant's termination of employment on account of the Participant's death, if the election is filed with the Company prior to the date of death. 14. Hardship Withdrawals. In the discretion of the Committee, upon a showing of hardship, a Participant may receive a distribution with respect to Share Units credited to his or her Deferred Accounts prior to the date otherwise scheduled for distribution. -6- 15. Change in Control Distributions. All Deferral Elections shall be cancelled upon the occurrence of a Change in Control, and delivery of the shares may not be deferred to a date that is later than the date of a Change in Control. For purposes of the Plan, the term "Change in Control" shall have the meaning set forth in the Burlington Northern Santa Fe 1996 Stock Incentive Plan, as it may be amended from time to time. 16. Designation of Beneficiary. Each Participant from time to time, by signing a form furnished by the Committee, may designate any legal or natural person or persons (who may be designated contingently or successively) to whom his or her benefits under the Plan are to be paid if the Participant dies before receiving all of his or her benefits. A beneficiary designation form will be effective only when the signed form is filed with the Company while the Participant is alive and will cancel all beneficiary designation forms filed earlier. If a deceased Participant failed to designate a beneficiary as provided above, or if the designated beneficiary of a deceased Participant dies before the Participant or before complete payment of the Participant's benefits, the benefits shall be paid to the legal representative or representatives of the estate of the last to die of the Participant and designated beneficiary. 17. Statement of Deferred Accounts. As soon as practicable after the end of each Plan Year, the Company shall provide each Participant with a statement of the transactions in each of his or her Deferred Accounts during that year and his or her Deferred Account balances as of the end of the year. 18. Election Forms. Participant election forms made under the Plan shall be in such form as may be established by the Committee. The Committee may establish additional rules applicable to such elections as may be set forth in the election forms. 19. Restrictions on Share Units. Until distribution, Share Units may not be sold, assigned transferred, pledged or otherwise encumbered, and the Participant shall not be treated as a stockholder with respect to Share Units. 20. Rights to Shares. Neither the Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company whatsoever prior to the date shares of Stock are distributed. The Participant shall have only a contractual right to the shares and cash distributable under the Plan, unsecured by any assets of the Company or any subsidiary. -7- 21. Plan Not Contract of Employment. The Plan does not constitute a contract of employment, and does not give the Participant the right to be retained in the employ of the Company. 22. Successors and Assigns. The Plan shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company's assets and business. 23. Administration. The authority to manage and control the operation and administration of the Plan shall be vested in the BNSF Employee Benefits Committee (the "Committee"). The Committee is authorized to make appropriate modifications of the Stock award agreements (including Stock Option and Restricted Stock agreements) to reflect deferral elections under the Plan. Subject to the provisions of the Plan, the Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. Except to the extent prohibited by applicable law or the rules of any stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and, except as otherwise provided by the Committee from time to time, the Committee delegates its responsibilities to the Human Resources Department. Any such allocation or delegation may be revoked by the Committee at any time. 24. Amendment. The Plan may be amended from time to time by the Chief Executive Officer of the Company, and additional rules may be established by the Chief Executive Officer of the Company, except that amendments of the rules relating to distributions of the Chief Executive Officer's benefits may be amended by the Chief Executive Officer only with the approval of the Committee. -8- The Burlington Northern Santa Fe Corporation Senior Management Stock Deferral Plan is hereby adopted, effective January 1, 1997 by Burlington Northern Santa Fe Corporation. IN WITNESS WHEREOF, the President and Chief Executive Officer of Burlington Northern Santa Fe Corporation has caused the adoption of this Plan to be duly executed on this _____ day of December, 1997. BURLINGTON NORTHERN SANTA FE CORPORATION ------------------------------------ Robert D. Krebs President and Chief Executive Officer -9- EX-21 8 SUBSIDIARIES OF BNSF Exhibit 21. Subsidiaries of the Registrant BURLINGTON NORTHERN SANTA FE CORPORATION BNSF Acquisition, Inc. (DE) 100% Burlington Northern Santa Fe British Columbia, Ltd. (DE) 100% The Burlington Northern and Santa Fe Railway Company (DE) 100% Alameda Belt Line (CA) 50% The Belt Railway Company of Chicago (IL) 16.6% BN Leasing Corporation (DE) 100% The Burlington Northern and Santa Fe Railway Company de Mexico, S.A. de C.V. (Mexico) 50% Burlington Northern Dock Corporation (DE) 100% Burlington Northern International Services, Inc. (DE) 100% The Burlington Northern and Santa Fe Railway Company de Mexico, S.A. de C.V. (Mexico) 50% Burlington Northern (Manitoba) Limited (Manitoba) 100% Burlington Northern - Mexico Inc. (DE) 100% Burlington Northern Railroad Holdings, Inc. (DE) 100% Burlington Northern Relocation Services Inc. (TX) 100% Burlington Northern Santa Fe Manitoba, Inc. (DE) 100% Burlington Northern Worldwide, Inc. (DE) 100% Camas Prairie Railroad Company (OR) 50% Central California Traction Company (CA) 33.3% Constellation 130, Inc. (CA) 100% The Dodge City and Cimarron Valley Railway Company (KS) 100% Electro Northern, Inc. (DE) 100% The Gulf and Inter-State Railway Company of Texas (TX) 100% Houston Belt & Terminal Railway Company (TX) 50% INB Corp. (NV) 100% Iowa Transfer Railway Company (IA) 25% Kansas City Terminal Railway Company (MO) 25% Limited Partnership Management, Inc. (DE) 100% Longview Switching Company (WA) 25% Los Angeles Junction Railway Company (CA) 100% Metrovias S.A. (Argentina) 16.6% Midwest/Northwest Properties Inc. (DE) 100% M-R Holdings Acquisition Company (DE) 100% M T Properties, Inc. (MN) 37.8% Northern Radio Limited (British Columbia) 100% The Oakland Terminal Railway (CA) 50% Oklahoma City Junction Railway Company (OK) 100% Paducah & Illinois Railroad Company (KY) 33.3% Pine Canyon Land Company (DE) 100% Portland Terminal Railroad Company (OR) 40% Rio Grande, El Paso and Santa Fe Railroad Company (TX) 100% Santa Fe Forwarding Company (DE) 100% Santa Fe Pacific Insurance Company (VT) 100% Santa Fe Pacific Railroad Company (Act of Congress) 100% Santa Fe Rail Equipment Company (DE) 100% Santa Fe Receivables Corporation (DE) 100% Santa Fe Terminal Services, Inc. (DE) 100% SFP Pipeline Holdings, Inc. (DE) 100% Santa Fe Pacific Pipelines, Inc. (DE) 100% Star Lake Railroad Company (DE) 100% St. Joseph Terminal Railroad Company (MO) 50% Sunset Communications Company (DE) 100% Sunset Railway Company (CA) 50% Terminal Railroad Association of St. Louis (MO) 14.3% Texas City Terminal Railway Company (TX) 33.3% Trenes de Buenos Aires S.A. 16.6% TTX Company (DE) 17% Walker-Kurth Lumber Company (TX) 100% Western Fruit Express Company (DE) 100% The Wichita Union Terminal Railway Company (KS) 66.6% Winona Bridge Railway Company (MN) 100% The Zia Company (DE) 100% EX-23.1 9 CONSENT OF PRICE WATERHOUSE EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in (i) the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 333-25627 and 333-32879; and 333-48227) and (ii) the Registration Statements on Form S-8 (Nos. 33-62823; 33-62825; 33-62827; 33-62829; 33-62831; 33-62833; 33-62835; 33-62837; 33-62839; 33-62841; 33-62943; 33-63247; 33-63249; 33-63253; 33-63255; 333-03275; 333-03277; 333-19241), of Burlington Northern Santa Fe Corporation of our report dated February 6, 1998 appearing on page 21 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-1 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Price Waterhouse LLP Chicago, Illinois March 30, 1998 EX-23.2 10 CONSENT OF COOPERS AND LYBRAND LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of Burlington Northern Santa Fe Corporation on Form S-8 (File Nos. 33-62823, 33- 62825, 33-62827, 33-62829, 33-62831, 33-62833, 33-62835, 33-62837, 33-62839, 33- 62841, 33-62943, 33-63247, 33-63249, 33-63253, 33-63255, 333-03275, 333-03277, 333-19241), and Form S-3 (File Nos. 333-25627, 333-32879 and 333-48227) of our report dated February 15, 1996, except as to the information presented in Note 8 for which the date is February 6, 1998, on our audit of the consolidated financial statements and financial statement schedule of Burlington Northern Santa Fe Corporation for the year ended December 31, 1995, which report is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. Fort Worth, Texas March 31, 1998 EX-24 11 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY WHEREAS, BURLINGTON NORTHERN SANTA FE CORPORATION, a Delaware corporation (the "Company"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for the fiscal year ended December 31, 1997; and WHEREAS, the undersigned serve the Company in the capacity indicated; NOW, THEREFORE, the undersigned hereby constitutes and appoints DENIS E. SPRINGER and JEFFREY R. MORELAND, his or her attorney with full power to act for him or her in his or her name, place and stead, to sign his or her name in the capacity set forth below, to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1997, and to any and all amendments to such Annual Report on Form 10-K, and hereby ratifies and confirms all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this Power of Attorney has been executed by the undersigned this 19th day of March, 1998.
/s/ JOSEPH F. ALIBRANDI /s/ JACK S. BLANTON - ----------------------------- ---------------------------- Joseph F. Alibrandi, Director Jack S. Blanton, Director /s/ JOHN J. BURNS /s/ DANIEL J. EVANS - ----------------------------- ---------------------------- John J. Burns, Director Daniel J. Evans, Director /s/ GEORGE DEUKMEJIAN /s/ BILL M. LINDIG - ----------------------------- ---------------------------- George Deukmejian, Director Bill M. Lindig, Director /s/ ROBERT D. KREBS /s/ ROY S. ROBERTS - ----------------------------- ---------------------------- Robert D. Krebs, Chairman, President and Roy S. Roberts, Director Chief Executive Officer, and Director /s/ VILMA S. MARTINEZ - ----------------------------- ---------------------------- Vilma S. Martinez, Director Arnold R. Weber, Director /s/ MARC J. SHAPIRO /s/ ROBERT H. WEST - ----------------------------- ---------------------------- Marc J. Shapiro, Director Robert H. West, Director /s/ J. STEVEN WHISLER /s/ EDWARD E. WHITACRE, JR. - ----------------------------- ---------------------------- J. Steven Whisler, Director Edward E. Whitacre, Jr., Director /s/ RONALD B. WOODARD /s/ MICHAEL B. YANNEY - ----------------------------- ---------------------------- Ronald B. Woodard, Director Michael B. Yanney, Director
EX-27 12 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Burlington Northern Santa Fe Corporation's Consolidated Financial Statements and is qualified in its entirety by reference to such financial statements. 1,000,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 31 0 705 70 205 1,234 23,955 4,744 21,336 2,060 5,181 0 0 2 6,810 21,336 0 8,413 0 6,646 0 0 344 1,404 519 885 0 0 0 885 5.72 5.64
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